Changes that will apply to all companies
Members' right to require general meetings
There will be a reduction in the percentage of voting rights required in support of a members' demand for a general meeting. Currently, this is 10% (reduced to 5% in certain circumstances for private companies). The Regulations will change this to 5% in all cases.
Voting by proxy
Where a vote is taken on a show of hands, each proxy appointed by a member will have one vote (so a member holding more than one share will still be able to appoint multiple proxies, each of whom will have a vote on a show of hands).
- When a proxy has been appointed by more than one member entitled to vote on the resolution on a show of hands and each such member instructs the proxy to vote the same way on the resolution the proxy will have one vote. If the proxy is instructed to vote in different ways by different members he will have one vote for and one vote against the resolution. (s. 285 Companies Act 2006)
- On a poll, where more than one proxy is appointed by the same member, the proxies together cannot have more votes than the member in person.
Current provisions have thrown up some confusion about how many votes proxies have on a vote taken on a show of hands and these amendments have sought to clarify the position.
Advance voting on a poll
This new provision will allow a company's articles to contain provision for shareholders to vote by correspondence in advance (electronically or by post), without appointing a proxy. The amendments will also create the right to demand a poll by correspondence in advance.
For traded companies there is an additional requirement that any such provision is made subject only to such requirements and restrictions as are (a) necessary to ensure the identification of the person voting; and (b) proportionate to the achievement of that objective. (s. 322A Companies Act 2006)
These new provisions may encourage more shareholder involvement as shareholders who can't attend the meeting and are reluctant to appoint a proxy will still be able to vote. Companies will wish to ensure that voting rights are properly exercised, so that the identity of the voter and the voter's intention can be clearly established.
Current company law permits a corporate shareholder to appoint one or more representatives but provides that if the representatives vote in different ways they will be treated as abstaining from the vote. Amendments will enable multiple corporate representatives appointed by a member to vote in different ways in respect of different blocks of shares. (s. 323(4) Companies Act 2006)
This amendment is important as it will allow proper representation of beneficial owners whose shares are held by corporate nominees (such as unit trust and other investment entities) without the need for individual proxy appointments.
Obligation of proxies
An express obligation for proxies to act in accordance with any instructions given by the member appointing them is to be introduced. (s. 324A Companies Act 2006)
It is arguable that this provision isn't needed as proxies are already bound by a contractual or a fiduciary duty to act in such a way. The Department for Business, Innovation and Skills (BIS) however decided that the provision needs to be stated "as a proposition of company law".
Electronic meetings and voting
Provisions are to be inserted to make it clear that "electronic" meetings can take place without prejudicing the general law on meetings and voting, confirming that people can attend, speak and vote at meetings by electronic means without having to be present in person.
For traded companies the use of electronic means to enable shareholders to participate in a general meeting may only be subject to such requirements and restrictions as are (a) necessary to ensure the identification of those taking part and the security of the electronic communication; and (b) proportionate to the achievement of those objectives. (s. 360A Companies Act 2006)
Changes that will only apply to traded companies
A traded company is defined in the Regulations as "a company any shares of which -
a.carry rights to vote at general meetings, and
b.are admitted to trading on a regulated market in an EEA state by or with the consent of the company."
This will include (among others) companies with shares listed on the London Stock Exchange and on Plus Markets, but excludes AIM-listed companies.
Notice of general meetings
Traded companies that wish to continue holding general meetings (other than AGMs in the case of public companies) on 14 days' notice, rather than the standard 21-day notice period, which is to be imposed by the Regulations from 3 August, will need to comply with two specified conditions.
These conditions are:
- that the company offers "the facility for members to vote by electronic means accessible to all members who hold shares that carry rights to vote at general meetings".
This condition will be met if there is "a facility, offered by the company and accessible to all such members, to appoint a proxy by means of the website."
- a special resolution reducing the period of notice to not less than 14 days has been passed at the most recent AGM or at a general meeting held since the AGM.
BIS issued guidance to traded companies that wished to preserve the ability to call general meetings on 14 days' notice in December 2008, which was commented on in Wragge & Co's previous alert "Planning an Annual General Meeting" in February this year. Many traded companies have already passed (or will pass) the required resolution at their AGMs this year. The resolution will need to be renewed at each subsequent AGM.
Information to be published prior to the meeting
The amount of information which traded companies are required to send or make available to their shareholders prior to the meeting is to be extended. This relates both to the contents of the notice of meeting and to the information which must be published on a website prior to the meeting. (ss. 311 and 311A Companies Act 2006)
Notices of meeting will have to contain a number of specified statements regarding the exercise of rights to speak and vote and (if the notice is given more than six weeks before the meeting) rights to require additional resolutions or other business to be put to the meeting.
Additional obligations in relation to website publication will include:
- in advance of the meeting, the matters set out in the notice of meeting and details of the total voting rights exercisable at the meeting in relation to each class of shares; and
- after the meeting, additional details of the votes cast and abstentions on a poll, which must be posted within 15 days of the meeting (or within a day after the result of the poll is declared, if later).
Questions at meetings
A traded company must ensure that any question raised by an attending member at a general meeting relating to the business being dealt with at the meeting is answered, subject to certain conditions.
No answer needs to be given if (a) to do so would (i) interfere unduly with the preparation for the meeting; or (ii) involve the disclosure of confidential meeting, (b) the answer has already been given on the company's website in the form of an answer to a question; or (c) it is undesirable in the interests of the company or the good order of the meeting that the question be answered.
This amendment will enable shareholders to take full advantage of the general meeting as the main forum in which they can exercise their right to ask questions.
Appointment and termination of proxies
The Regulations set out new formalities for the appointment and termination of proxies.
They specify that any appointment or termination must be notified to the company in writing. Beyond this formal requirement the shareholder shall be not obliged to provide any details other than reasonable evidence of the identity of the member and the proxy and of the member's instructions as to how the proxy is to vote (if any).
"In writing" here should be interpreted as including by electronic means as the provisions also oblige traded companies to give an electronic address in every instrument of proxy sent out by the companies for the purposes of a general meeting.
Duty to hold Annual General Meeting
This clarifies the position that private companies that fall within the definition of a "traded company" must hold an AGM within nine months of each accounting reference date.
Other than this exception, private companies are no longer required to hold an AGM unless their articles state that they must.
Very few private companies will be caught by this provision.
Notice of AGM and the right to have a matter included in the business of the AGM
Where a notice of AGM is sent more than six weeks before the meeting, the notice must include a statement of the members' right to require the company to include a matter in the business to be dealt with at the meeting.
A company is required to include such a matter if it has received a request to do so from members representing at least 5% of the total voting rights or least 100 members who have a right to vote and hold shares on which there has been paid up an average sum, per member, of £100.
Share dealing and determination of voting rights
The Regulations state that traded companies may not include in their articles anything restricting share transfers in the 48 hours preceding a general meeting (where the restriction does not otherwise apply) or restricting rights to vote where shares have not been dealt with in a specified way. They go on to provide that rights to vote at a traded company's general meeting must be determined by reference to those on the register of members either:
- at any time on the day of the meeting before the time for the holding of the meeting; or
- 48 hours before the time for the holding of the meeting (apparently even if this would not fall on a working day), but not at any intervening time.
Chairman's casting vote at general meetings
Readers of Wragge & Co's previous analyses may recall that a chairman's casting vote in the event of a tied members' vote was first ruled to be contrary to the Companies Act 2006 provisions requiring "one member, one vote" but then later re-instated for companies which included such a provision in their articles as at 30 September 2007. Traded companies will no longer be able to provide for a casting vote at general meetings in any event.