The current flexibilities offered in the Corporate Governance and Insolvency Act 2020 for holding general meetings are due to expire on 30 March 2021 and although the Government continues to pursue the opportunity to introduce further primary legislation, this opportunity is limited, particularly in the shorter term.
Therefore, with the AGM season fast approaching, ICSA in association with, amongst others, the FRC and the Investment Association, has produced a guidance note to help public companies plan for their upcoming AGM.
In light of the Prime Minister’s statement, it appears likely that general meetings will be required to be held on a ‘closed basis’ until at least 17 May and possibly until at least 21 June.
- Without further legislation, closed AGMs after 30 March 2021 will only be possible if legislation at the time precludes unnecessary travel and gatherings of more than a very limited number. Companies could, in these situations restrict the number of attendees to the quorum and anyone else whose attendance is necessary for the conduct of the meeting.
- In this situation, companies should be unequivocal in precluding shareholders from attending physically unless the restrictions have been relaxed by the time of the meeting.
- Even in the absence of a national lockdown or tight restrictions, given the uncertainty surrounding public gatherings and the broader health considerations, companies should strongly recommend that shareholders do not attend the physical meeting and shareholders should be encouraged to appoint the chair as their proxy rather than a named individual, as was the case in the 2020 AGM season.
Planning for the meeting
- Companies are advised to plan for the AGM based on the restrictions on gatherings in place at the time the notice is sent out but should also consider contingency plans. For example, planning for a limited capacity for the AGM but having a back-up plan for a change to a larger venue with more capacity should restrictions be eased by the time of the meeting.
- Companies should opt for a venue under the company’s control, i.e. their own offices/premises. This will make changing any arrangements easier.
- Any accompanying documentation to the AGM notice should warn shareholders that arrangements may change and where notice of any changes will be published (e.g. the company’s website). The ICSA note contains suggested drafting.
- If a company changes the format of the meeting after the notice has been sent out, a public announcement via an RNS should be published. If there is a change of venue, companies will need to check the provisions in their articles.
- Where shareholders are invited to attend the physical meeting, shareholders could be encouraged to pre-register their intention to attend as this will help companies gauge the level of attendance and pose specific health questions.
- It is advisable for as many directors as possible to attend the meeting and in particular the chairs of board committees.
Hybrid general meetings
- Companies can organise hybrid meetings provided their articles do not (i) require that being present at an AGM or other general meeting means physical presence at a single location; or (ii) prohibit electronic participation. Companies should check their articles.
- Holding a hybrid AGM will not preclude shareholders from attending in person. Companies could communicate that the physical part of the meeting is intended to accommodate only the bare quorum and shareholders are encouraged to attend virtually.
- For a valid hybrid meeting, participants must have the ability to vote in real time, hear the proceedings, speak and be heard. Asking questions at a meeting through a chat function does not equate with the ability to ‘speak’ and ‘be heard’ unless there are specific provisions in the articles which provide for this. To be a valid hybrid meeting audio functionality for those attending electronically must be incorporated into the meeting arrangements.
- If a company’s articles do not contain specific provisions for hybrid meetings, companies are advised to amend their articles to provide for hybrid meetings and to address other relevant procedural mechanics (e.g. technological failures, voting etc).
- In 2020 14% of companies amended their articles to permit hybrid or virtual meetings compared to 4% in 2019 (PLC Annual Reporting and AGMs 2020 – What’s Market Practice).
- Companies should offer as much electronic engagement with shareholders as is possible and proportionate whether before, during or after the meeting to enable shareholders to feel that they can participate effectively without the need for physical attendance.
- Companies who do not intend to hold a hybrid meeting could consider:
- an online Q&A with answers provided in advance of the proxy deadline (in 2020, of the 163 FTSE 350 sampled companies*, 81.6% made arrangements to allow for shareholder Q&A with the board);
- webinars and town hall events;
- live streaming of the meeting with a facility to ask questions in real time; or
- holding shareholder engagement events (e.g. capital markets days).
*FRC publication - AGMs: An opportunity for change October 2020