These unprecedented times have required innovation (and patience with internet glitches!) to ensure the continued operation of ‘business as usual’ from a governance perspective. We have already seen the greater use of electronic meetings, written resolutions, alternative voting mechanisms, urgency procedures and powers of attorney and it is likely that some of these measures will continue to be used more widely in the future.
However, some governing documents (Rules/Articles of Association) contain quorum provisions which require a minimum number of board members or, more commonly, company members or shareholders to attend in person in order for a board or general meeting (including Annual General Meetings (AGMs) to be held validly. There can also be restrictions on the ability to hold these meetings virtually at all. This clearly presents concerns, particularly with AGM season upon us and the need for accounts to be approved in order to meet statutory filing deadlines.
The new Corporate Insolvency and Governance Act 2020 (CIGA) provided some welcome flexibilities as organisations continue to manage their governance requirements and expectations whilst certain lockdown measures and social distancing continue. The CIGA allows organisations to hold shareholder/company member meetings by virtual means until 30 September 2020 (whether or not this is permitted under the constitution) and so this should allow most organisations with financial year ends of 31 March to have their usual September AGM virtually, or in hybrid form, as required. The Government may also extend this period to 5 April 2021 at the latest but this has not yet been confirmed.
Virtual AGMs and shareholder approvals
The key points within the CIGA with regard to holding virtual AGMs are that:
- organisations may choose how to hold a general meeting, including their AGM, including as a partial or full virtual meeting by phone or video conference, regardless of whether this is allowed by the organisation’s constitution;
- organisations may limit the number of in-person attendees and may choose to hold a meeting with only the minimum number of attendees required to form a quorum. Shareholders/company members who are not allowed to attend the meeting must still be allowed to vote; this could include by allowing shareholders/company members to appoint the chair of the meeting as their proxy, or by allowing voting through an online facility or an app;
- organisations should still engage appropriately with shareholders/company members, such as by holding an online shareholder/company member Q&A or an additional shareholder/company member event once appropriate to do so;
- the CIGA applies retrospectively and so will validate any meetings you may have already held since 26 March, even if they were not held in accordance with your governing documents (e.g. virtually, despite there being no constitutional provision for virtual meetings) and could also validate any resolutions passed at those meetings;
- you may also choose to use the flexibilities within the CIGA to postpone meetings, including your AGM, instead;
- the CIGA does notallow an organisation that has already issued its notice of general meeting to change the format of its meeting. This will be possible only if the organisation’s constitution allows it to. We would recommend seeking further advice if this applies to you.
The Chartered Governance Institute (ICSA) has also published two guidance notes aimed at charities, social enterprises and mutuals, in relation to CIGA and holding AGMs which can be found here (you will need to sign up for a free subscription).
The CIGA also grants an automatic extension for filing requirements for Companies House including the filing of:
- accounts – filing periods have been extended from nine to 12 months from the end of the financial year for a private company, community interest company (CIC) or limited liability partnership (LLP), and from six to nine months for a public limited company (PLC). However, please note, this extension doesn’t apply to any organisations that applied for an accounts filing extension at the beginning of the COVID-19 pandemic;
- confirmation statements – the filing period has been extended from 14 to 42 days from the ‘made up to’ date;
- charges and mortgages – the filing period has been extended from 21 to 31 days from the creation/variation of the charge;
- other event driven filing requirements (including updating director, secretary, people with significant control (PSC) notifications and registered office changes) – the filing period has been extended from 14 to 42 days to give notice to Companies House.
There will be no extension for those companies, CICs and LLPs whose accounts or confirmation statement filing dates fall on or after 6 April 2021.
For community benefit societies, the Financial Conduct Authority (FCA) has confirmed:
- applications submitted via either the Mutuals Society Portal or by email to [email protected] (or to [email protected] for annual returns) will allow them to process your application significantly quicker than applications sent by post. The Mutuals Team strongly advise against submitting post at this time;
- it now accepts electronic signatures on all applications;
- it no longer requires statutory declaration forms to be fully completed and does not require the form to be signed by a solicitor/commissioner for oaths/notary public or justice of the peace. The only requirement is that an officer/secretary of the society completes the first half of the form and signs this. Again, electronic signatures will be accepted;
- accounts – the FCA has confirmed it will not take any action to follow-up on any delayed submission of annual returns and accounts by societies before 31 October 2020.
Maintaining flexibilities going forward
The flexibilities within the CIGA are only temporary and will currently only last until 30 September 2020. Even if provisions are extended it is unlikely they will be extended beyond a further few months. We would advise that organisations review their constitutional and governance documents so that they are sufficiently flexible going forwards.
The flexibilities within the CIGA mean you could amend your governing documents to build in such flexibilities such as adjusting quorum requirements as necessary, allowing virtual attendance etc, and ask for changes to be approved and adopted by company members/shareholders via virtual means when ordinarily your constitutions may require holding in person general meetings.
Any changes will also need to be reflected in accompanying governance documents such as Standing Orders, Terms of Reference etc.
We would suggest seeking further advice on potential solutions for incorporating further flexible governance arrangements based on your organisation’s existing governance arrangements.
Electronic communication with shareholders and company members can include being able to send important governance documents such as notices of meetings, written resolutions, documents for approval and meeting agendas electronically such as via email, a website or an online portal. Being able to use electronic communication provides many benefits such as increased flexibility and speed of communication, reduced costs, a more efficient and certain process, and being more environmentally friendly. During this pandemic it has become an increasing necessity to be able to engage with shareholders and company members electronically whilst we continue to work from home.
However there are a number of key considerations that you will need take into account before you can decide to communicate with shareholders/company members by electronic means.
For your organisation to be able to send documents to shareholders or company members via email, you should:
- check your constitutional documents to see if there are any provisions or specific requirements for email communications;
- obtain specific individual consent from each shareholder or company member for them to receive communications via email;
- ensure you have the correct email address for each shareholder/company member; and
- note that each document is deemed to have been delivered 48 hours after being sent electronically via email, unless your constitutional documents specify a different period. This is important when calculating if sufficient notice has been given.
For your organisation to be able to share documents with shareholders or company members via the website, you should:
- obtain individual consent from each shareholder or company member to receive communications in this way. This is in addition to any provisions within your constitutional documents or a resolution permitting electronic communication;
- ensure that any request for consent clearly states that failure to respond within 28 days will mean the shareholder or company member will have deemed to have consented to electronic communication via the website;
- continue to send hard copy documentation to any shareholder or company member that refuses consent, and ensure you do not ask them to provide consent to communication via the website for a further 12 months;
- ensure that information and documents published on the website (once consent is obtained) are accessible, can be clearly read and can be printed off from the website so that shareholders or company members can obtain a copy; and
- notify shareholders or company members of publication of information on the website (this notification must be made by hard copy in the post if shareholders or company members haven’t provided consent to email communication (see above).
Virtual meeting tips checklist
We have also pulled together a checklist of things to consider and to assist when implementing governance arrangements virtually:
Getting the balance right
Information and questions
Playing by the rules