According to the Financial Reporting Council, "An effective AGM offers opportunities for:
- The board to present the company strategy and performance and other matters to investors.
- Shareholders to hold the board to account through Q&A and discussion, prior to voting.
- Shareholders to exercise their vote after consideration of the information presented."
With this in mind, and with covid restrictions now entirely lifted throughout the UK, companies planning their annual general meetings might want to reflect on whether they go back to "business as usual" for their AGMs. Whilst companies have no choice about attendance in person by shareholders once more, there are some best practice ideas from AGMs held during the 2020 and 2021 which they may also want to adopt for their future AGMs to ensure they are as effective as possible.
As we wrote in our previous articles about AGMs here and here, during the pandemic temporary flexibility to enable companies to hold their AGMs whilst complying with stay at home and social distancing rules was given by the Company Insolvency and Governance Act 2020 ("CIGA"). Although the CIGA provisions on meetings fell away in March 2021, covid restrictions were still in place so companies had to restrict numbers attending meetings in person and were able to impose additional restrictions such as asking attendees to pre-register, take covid tests and wear masks at the AGM. AGMs to be held in summer 2022 and beyond won't need to take these into account.
As we move into a post-pandemic environment, companies may want to think about adopting some of the recent innovations in AGM practice to enhance shareholder engagement and to reduce the environmental impact of a physical meeting.
Reducing the environmental impact of AGMs
A company with net zero targets and strong ESG credentials could consider having a hybrid AGM allowing investors, particularly overseas shareholders, to participate in the meeting without having to travel. The reduced requirements at the venue, such as catering and hard copies of AGM papers, may also positively impact the carbon footprint of a traditional 'live' meeting.
The ability for shareholders to attend a hybrid meeting (see our article for more details on hybrid AGMs) is thought to have increased shareholder engagement at AGMs over the past two years and has enabled a greater number of shareholders to put questions to the board at the AGM. Holding a hybrid meeting could incentivise a shareholder, who may previously not have bothered to attend the AGM in person, to attend virtually and participate as if they were there in person. We talked about this in our podcast; No going back: what's here to stay for virtual AGMs and directors' duties in a virtual world. As people have had to become more digitally literate over the pandemic, perceived barriers to joining an AGM virtually may have lessened for individual investors.
Commentators believe that shareholder engagement is likely to increase as investors want to question boards on their climate change plans and their ESG credentials as well as company performance and executive remuneration. Hybrid AGMs could enable this engagement as well as having lesser environmental impact than an 'in person' only AGM.
However, the need for an uninterrupted connection to the meeting means that the technology must be reliable. This is particularly so where shareholders wish to exercise their statutory rights to be "heard" at the AGM – companies may need to think about how to achieve this by using, for example, telephony rather than a chat function for shareholder questions.
Alternatively, companies may want to host separate shareholder engagement events at which a live Q&A with the directors can be hosted without concerns that a technology failure could invalidate business conducted at a hybrid AGM.
Best practice for AGMs
The Financial Reporting Council's paper, AGMs: an opportunity for change, includes helpful advice on best practice for holding AGMs which companies preparing for this year's and future AGMs are advised to consult.
If you would like any advice on preparing for your company's Annual General Meeting, please get in touch with a member of the Corporate team at Brodies.