Annual General Meetings: We’ll Meet Again, Don’t Know Where, Don’t Know When

Latham & Watkins LLP

Latham & Watkins LLPBEIS and FRC released further updates on how companies can hold meetings during the COVID-19 pandemic.

On 14 May 2020, the Department for Business, Energy & Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) released a second Q&A in relation to proposed legislative measures to assist companies in holding their annual general meetings (AGMs) in light of the COVID-19 restrictions. This Q&A follows a 28 March announcement from Alok Sharma, the Secretary of State for BEIS, stating that the government would bring forward legislation as soon as possible to assist companies facing difficulty meeting statutory obligations to hold AGMs because of COVID-19 restrictions. This latest Q&A is to be read in conjunction with the first joint BEIS/FRC Q&A published on 17 April.

The latest Q&A confirms the AGM legislation will be introduced as soon as the Parliamentary timetable allows, and that BEIS expects that the new measures will apply retrospectively from 26 March and until the end of September 2020. Although the first Q&A indicated that the new legislation was expected to provide companies with additional flexibility to both postpone meetings, or to hold “closed meetings” with the minimum of people required by telephone, or video, etc., the latest Q&A does not elaborate about  how these meetings can be convened.

Whilst no specific draft legislation has been provided, the Q&A has been released to give companies a basis on which to plan for AGMs in the coming months. The Q&A suggests that companies could hold AGMs in accordance with the new legislation, for example virtually, prior to  Parliament passing the legislation, given its proposed retrospective effect. However, while BEIS and FRC expect that the legislation will pass into law and apply retrospectively, they cannot guarantee this outcome. In short, any resolutions passed in AGMs in accordance with the draft proposals outlined in the Q&A before the new legislation comes into force risk being invalid.

The government’s position on virtual meetings has also become less clear. The first Q&A confirmed that virtual meetings are uncommon and largely untested in the UK, therefore, mandating their use was likely to create further significant issues. This echoed the position of ICSA in its AGM Guidance released on 27 March. However, the second Q&A appears to suggest that the new legislation may allow virtual meetings. If the proposed legislation actually permits virtual meetings this will be a significant step towards resolving the practical difficulties of convening meetings in light of the government restrictions on movement in response to the COVID-19 pandemic.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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