Flexibilities in relation to AGMs contained in the Corporate Insolvency and Governance Act ended on 30 March.
The Corporate Insolvency and Governance Act 2020 (CIGA) provided companies required to hold an AGM during the pandemic with much-needed flexibilities to hold their AGMs safely (including by holding closed meetings) to prevent the spread of COVID-19.
It was clear when CIGA was introduced that the flexibilities were to be temporary and, on 30 March, the measures in relation to holding AGMs finally came to an end. Those measures are detailed in our earlier briefing note.
Companies required to hold AGMs or other general meetings after 30 March need to carefully consider how best to plan and safely hold those meetings given the likelihood of continuing UK restrictions on travel and in-person gatherings particularly during the first few months of 2021.
New ICSA guidance on 2021 general meetings and the impact of COVID-19
To help companies during this time the Chartered Governance Institute (ICSA), with the assistance of a working group of the City of London Law Society Company Law Committee and Martin Moore QC, published a new guidance note to help public companies plan their 2021 AGM (or other general meeting) and navigate the period after 30 March when the temporary flexibilities contained in CIGA have ended, but UK restrictions preventing or limiting shareholder attendance in person remain in place.
The guidance note has been produced with the support of the Department for Business, Energy and Industrial Strategy and the Financial Reporting Council (FRC), and is also supported by the Investor Association, the Investor Forum and the Quoted Company Alliance.
This article contains a brief summary of some of the key points contained in the guidance note. For public companies planning their AGM, or other general meeting, in 2021 the guidance contains a number of helpful practical suggestions for companies to consider and it is worth reading the guidance note in full.
Adopting a flexible approach in 2021
One of the key messages for companies contained in the guidance is that they will need to be flexible when planning for an AGM, or other general meeting, to be held after 30 March.
Companies will need to consider the possible options available in light of UK legislation and guidance to prevent the spread of COVID-19, both at the time that the notice of the relevant meeting is issued and again on the date of the meeting itself in case the position has changed, and potentially adapt the format of the meeting accordingly.
There are four key considerations for companies set out in the guidance note which are summarised below.
1) Holding closed meetings
After 30 March, companies will not generally be able to continue to hold closed meetings.
The guidance note provides that if UK legislation at the time of the meeting prevents unnecessary travel and gatherings of more than a very limited number of attendees then companies can, in those circumstances, effectively hold a "closed" meeting with only those forming the necessary quorum attending the meeting in person (together with any other attendees who must be present for the conduct of the meeting).
2) Making contingency plans for AGMs and other general meetings
The guidance recommends that companies should plan for holding an AGM or other general meeting based on the restrictions on gatherings at the time the notice of the meeting is issued (including restrictions at the venue of the meeting). However, companies should also consider contingency plans as the position may change between the date the notice is sent and the date of the meeting itself.
In practice this may involve planning for an effectively "closed" meeting (if lockdown measures remain in place, for example) but having a contingency plan to hold a larger meeting with a greater number of shareholders in attendance if UK restrictions allow for this at the time of the meeting (or conversely, planning for a larger meeting with a contingency plan to hold a small or closed meeting if restrictions are tightened before the date of the meeting).
The guidance notes that it would be helpful for companies to choose venues that are under their own control for the AGM or other general meeting (such as the company's own office or premise) rather than using hotels or conference centres. There are two reasons for this set out in the guidance. The first is that, depending on restrictions in place on the date of the meeting, hotels or conference centres may not be able to open. The second reason is that a change to the format of the meeting (for example, from a larger meeting to a closed meeting) is likely to only need a public announcement via an RIS. A change to the meeting venue, however, will require a review of the company's articles in relation to adjournment, postponement and changing the place or time of the meeting and companies will also need to consider how best to communicate those changes to shareholders.
In light of the potential for the format of the meeting to change, the guidance notes that it is likely to be helpful for companies to address this in the documentation accompanying the meeting notice (together with details of how the company intends to communicate any such meeting format changes). The formal notice of the meeting however should not contain any contingency planning and should only include a single venue, date and time of the meeting. The guidance note includes suggested example drafting for companies to use if required.
3) Shareholder attendance
The guidance notes that, unless there is UK legislation limiting public gatherings at the time of the meeting, companies should be prepared to accommodate at the physical venue of the AGM the maximum number of shareholders permitted to attend by the UK legislation at the relevant time (while ensuring that the venue remains COVID-19 secure) or risk the requirement to adjourn the meeting if not all shareholders wishing to attend can do so.
While that is the case, if there are no tight UK restrictions limiting the number of those who are allowed to gather at a venue at the time the notice of the meeting is issued, the guidance suggests that companies should strongly recommend that shareholders do not attend the physical venue, given the continued uncertainty around public gatherings and public health considerations. Of course, if there are UK restrictions on public gatherings then the guidance notes that companies should be unequivocal in preventing the physical attendance of shareholders at the meeting venue.
4) Hybrid AGMs
The guidance notes that a company can hold a hybrid AGM or other general meeting (a meeting with some attendees participating virtually and others participating in person at the meeting venue) even if the company's articles do not specifically address holding a hybrid meeting unless the company's articles contain provisions which prevent holding such a hybrid meeting.
Companies intending to hold a hybrid meeting should therefore make sure that their articles do not require that being present at an AGM or other general meeting means physical presence at a single location and that the articles do not prohibit electronic participation.
The guidance is clear that it does not suggest that companies must hold a hybrid meeting if permitted to do so – it is for each company to consider what is appropriate, taking into account its own individual circumstances, and the importance of ensuring effective shareholder engagement.
If a company is intending to hold a hybrid meeting, it is noted in the guidance that holding a hybrid meeting will not prevent shareholders attending in person (if permitted by UK restrictions in place at the time of the meeting) and therefore companies may need to communicate that it is intended that the physical part of the meeting will be for only the quorum to attend in person (together with anyone else necessary for the conduct of the meeting) and for all other shareholders to be encouraged to attend virtually. The guidance contains suggested drafting for companies to use if required.
Good practice considerations
The measures detailed in the guidance note are seeking to ensure that AGMs and other general meetings can be held safely in 2021.
AGMs are, of course, an important opportunity for shareholders to engage with companies and companies should seek to ensure that there are opportunities for electronic shareholder engagement both before, during and after the meeting in question. It is noted in the guidance that following the FRC's review of 202 AGMs held between March and August 2020, 30 of those AGMs did not allow for any shareholder engagement through a Q&A either before, or during, the AGM.
The guidance note contains at section 2 a number of good practice recommendations for companies to consider to help to protect the interests of shareholders and stakeholders when AGMs are held in a closed, hybrid or otherwise restricted manner.
For more information on this or another related matter, please get in touch with Stephen Gibb, a Partner in our corporate finance team, or your usual Shepherd and Wedderburn contact.