The Chartered Governance Institute (ICSA) recently issued a guidance note on "2021 general meetings and the impact of COVID-19", written with input from Martin Moore QC and the support of the Department of Business Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC). This important Guidance is wide ranging and is designed to assist companies after the flexibilities of the Corporate Insolvency and Governance Act 2020 (CIGA) come to an end on 30 March 2021 and lockdown restrictions are relaxed.
We set out below 5 key takeaways from the guidance which companies should have in mind when preparing for their 2021 general meetings:
1. The return of physical meetings?
Pre-17 May: meetings should be held on a closed-door basis until at least 17 May and possibly until 21 June (on the basis of current Government guidance).
Post-17 May: companies are advised to plan for limited capacity physical meetings (or hybrid meetings) and consider contingency plans (e.g. a switch to a larger venue if restrictions are relaxed). Companies must have in place measures to ensure the health and safety of attendees.
2. Legal interpretation
Guidance is provided on key areas of legal uncertainty, including:
- following relaxation of Government guidance, there should be no limits (full or partial) on shareholder attendance, although companies can recommend that shareholders do not attend due to the unpredictability of the pandemic. A company can refuse admittance (under common law) if the meeting is already at capacity when a shareholder arrives, but cannot do so in advance of the meeting; and
- hybrid meetings can be held if the company's articles do not: (i) require that being present means a physical presence at a single location; or (ii) prohibit electronic participation. This is even the case if a company's articles do not specifically permit hybrid meetings.
3. The rise of hybrid meetings?
The Guidance emphasises a number of points in relation to hybrid meetings. In particular, participants at a hybrid meeting must have the ability to participate on an "equivalent basis". All participants must be able to vote in real time at the meeting. Audio functionality must also be incorporated so that participants can: (i) hear the proceedings; and (ii) speak and be heard at the meeting. This audio functionality is required to constitute a valid hybrid meeting – a chat function on its own is not sufficient.
4. A spectrum of shareholder engagement
There is a range of meeting arrangements that fall between a closed and a hybrid meeting – it is appropriate for a company to consider where on this spectrum its arrangements should fall given its specific circumstances and stakeholder interests. It is good practice for a company to choose an approach which is as close on the spectrum towards the hybrid model as is proportionate and reasonable.
5. The weird and the wonderful
AGMs need not be muted affairs with tea and biscuits served in the adjoining room. The Scottish Sun ran an article in late 2019 about Scottish craft beer company, Brewdog, which organises "Annual General Mayhem" events. The 2019 AGM was apparently a two day affair, attracting 13,000 "revellers" who were entertained by seven bands whilst sampling 111 beers at 15 bars. Sadly the pandemic put paid to that in 2020 but it did force other companies to consider alternative approaches. Smith & Nephew PLC became the first FTSE 100 company to hold an al fresco annual shareholders meeting when it held its 2020 AGM at Sheethanger Common in the Chilterns, shortly after the start of the pandemic. The meeting was quorate with the attendance of two shareholders. Perhaps we will see more adventurous options in 2021.