COVID-19 and its Effect on the AGM Season for Public Companies in the United Kingdom

The Government’s announcement of new measures on 23 March 2020 requiring people to stay at home, except for very limited purposes, and to stay two metres away from other people has had an effect on the ability of public companies incorporated in the United Kingdom to hold annual general meetings.

In the UK, under the Companies Act 2006 there is a requirement for public companies to hold an annual general meeting within six months following the end of their financial year. Therefore a large number of public companies, having a 31 December financial year end, are required to hold their annual general meetings by 30 June 2020.

Detailed guidance for public companies entitled "AGMs and impact of COVID-19" was published by the Institute of Chartered Secretaries and Administrators as of the close of business on 16 March 2020 (the Guidance). It should be noted that the Guidance was published before the new quarantine measures came into effect.

Set out below are some considerations for public companies in relation to convening and conducting their AGMs.

Virtual meetings and hybrid meetings

A virtual meeting is a meeting which takes place entirely online without there being a corresponding physical meeting.

There is uncertainty as a matter of English company law whether a virtual general meeting would constitute a valid meeting (although this has not yet been fully tested in the courts). Also, in the past corporate governance bodies have not approved of virtual meetings. For example, in December 2017, the Investment Association published a statement on virtual only AGMs and stated that they could be detrimental to board accountability as it is important for shareholders to be able to ask make statements and ask questions to the board. A similar message was echoed in the ISS Proxy Voting Guidelines for 2020 (published in 2019 before the start of the coronavirus pandemic). To date during the coronavirus pandemic (including since the new quarantine measures came into effect on 23 March 2020) few public companies have proposed virtual only AGMs in place of a physical meeting.

A hybrid meeting is a combination of a physical and an electronic meeting (usually meaning that shareholders can participate physically or electronically). A hybrid meeting can be held as a matter of company law if permitted by a company’s articles of association.

If a company has already issued its AGM notice for a physical-only meeting but its articles allow a hybrid AGM, it can change to a hybrid AGM. An announcement should be made to reflect this decision and the website should be updated.

In any event if a company is proposing electronic participation at its AGM, the company’s articles of association should be checked for any provisions which might prohibit such electronic participation. Before holding a virtual or hybrid meeting it would generally be advisable to have articles which expressly permit electronic participation.

Postponing the AGM

Since the Government’s new measures came into effect on 23 March 2020, a number of public companies have issued announcements postponing their AGM.

If a company has issued it notice of AGM notice, it would be entitled to postpone its AGM if its articles permit it to do so.

If a company does not have postponement provisions in its articles and it has already issued its notice of AGM it could consider convening the AGM but adjourning it to a later date.

Adapting the basis on which the AGM is held

Both before and since the new quarantine measures came into effect came into effect on 23 March 2020, a number of public companies have announced that their AGMs will still go ahead but with a number of changes (set out below), in particular changing the venue to outside London and urging shareholders not to attend physically (but encouraging them to submit proxies).

Following the introduction of the new quarantine measures, companies will need to consider whether any physical attendance of relevant individuals comprising a quorum at the designated venue is in accordance with the quarantine measures. This will depend on the individuals’ own circumstances.

Where companies are proposing to adapt the basis on which their AGMs will be held the Guidance recommends that:

• Companies establish a dedicated area on their website. The Guidance notes that this area would include the details of arrangements for the meeting and can be updated to reflect changes in the situation, including as regards attending the AGM.
• Companies encourage proxy voting. The Guidance recommends that specific provisions should be included in the notice of meeting encouraging shareholders to vote by proxy, and that on-line voting should be facilitated.
• Companies establish an online shareholder Q&A for the AGM. The Guidance states that Shareholders should be able to post questions related to the business of the AGM and that to the extent practicable, this should be kept up to date with answers up to the deadline for proxy voting. It is noted that questions can also be answered at the AGM, in particular if the AGM is being live streamed.
• Companies consider announcing a shareholder event to be held later in the year. Although this will not be the AGM, the Guidance suggests that companies may wish to offer shareholders, particularly retail investors, the opportunity to engage with directors later in the year.
• Companies ensure the AGM will be quorate. Generally, this is likely to require a small number of attendees, sometimes as little as two, and relevant provisions will be in the Articles.
• Companies restrict the number of non-shareholder attendees.
• Companies pre-register attendees.
• Companies live stream the AGM. The Guidance recommends that where technologically possible, a live stream of the event and/ or a phone link could be set up (although this would not constitute formal attendance at the meeting).

Conclusion

With the coronavirus pandemic resulting in frequent changes to daily life in the UK a number of public companies have had to make quick decisions about what steps to take in relation to their AGMs.

Although companies will need to consider their own specific circumstances, based on an analysis of announcements which have issued by public companies since the new quarantine measures came into effect on 23 March 2020 (up to as of the close of business on 26 March 2020) the majority of companies have stated that their AGMs will go ahead on an adapted basis while a sizeable minority of companies have been postponing their AGMs. Out of those companies that have stated that their AGMs will go ahead on an adapted basis, some have announced that their shareholders will not be permitted to attend physically.

It will be interesting to see if the legal complexities around holding virtual meetings which so many companies are now facing will mean that this issue will be addressed in a coherent and comprehensive way once the pandemic is thankfully behind us.

Read 'COVID-19 and its Effect on the AGM Season for Public Companies in the United Kingdom'.