Companies incorporated in the UK have been able to hold virtual meetings since August 2009 as a result of section 360A of the Companies Act 2006 inserted by the Shareholder Rights Regulations 2009, which implemented the EU Shareholder Rights Directive. The Directive only applies to companies whose shares are admitted to trading on a regulated market but section 360A applies to all UK companies, whether public or private. However, until recently it has not been used.
Jimmy Choo plc blazed a trail last year by holding the first virtual AGM of a Main Market listed company. This was trumpeted by Jimmy Choo and its registrars, Equinit, as a great success with much better attendance than Jimmy Choo’s first physical AGM in 2015. Their message was that they increased investor access whilst saving travel costs for investors and the cost to the company of hiring a venue and gathering the Board together physically. Jimmy Choo’s 2017 AGM will also be held electronically on 1 June.
No attendance numbers were published for Jimmy Choo’s 2016 AGM and so it is impossible to assess what “much better attendance” means. Around 72.64% of the shares were voted and these would have included the controlling shareholder’s 67.64% holding.
In order to participate at the Jimmy Choo 2017 AGM, the notice of AGM states that shareholders must download the latest version of the AGM app on to their smartphone or access it via Lumi AGM as a mobile web client to obtain a unique number and username to dial in to ask questions and to vote. For most investors, the shareholder of record will be their nominee, so that they would have to be appointed proxy or corporate representative by their nominee in order to participate.
In anticipation of its first virtual AGM, Jimmy Choo specifically amended its articles at its 2015 AGM to ensure that virtual meetings can take place. Any other company that is contemplating holding a virtual general meeting will need to include provisions permitting an electronic meeting in their articles of association Existing articles are unlikely to work if they refer to the “place” of the meeting and to members being able to see and hear each other. Articles also need to provide for adjournment should the technology fail.
The UK Corporate Governance Code states that the chairman should ensure that all directors attend general meetings and that the chairs of the audit, remuneration and nomination committees are available to answer questions at the AGM. Where a company has a large board, it may be difficult to ensure that the entire board is present electronically and participates fully. We would suggest that the chairman, the executive directors and the committee chairs at least should be together physically.
There is a large body of case law relating to physical shareholder meetings, dealing with claims that there had been irregularities and so that one or more resolutions passed at the meeting was invalid. The same issues plus the risk that the technology might fail means that there is likely to be case law in future on virtual meetings. The chair may have less control over a virtual meeting as people may be more willing to ask questions and the silent majority will find it hard to register disagreement. This may make it easier for the meeting to be disrupted, but for companies that are putting forward standard resolutions at their AGMs and have generally supportive shareholders, an electronic meeting may help them to be more communicative with their shareholders on the one hand whilst saving the expense of a physical meeting on the other.
Existing companies will need to amend their Articles and so will discover their shareholders’ appetite for virtual meetings when proposing the resolution to adopt the amended Articles. For new companies, we recommend that the power to hold a virtual shareholder meeting is taken, even if there is no intention to use it.