The Corporate Insolvency and Governance Bill 2019-20 (the Bill) will be considered in all stages on 3 June 2020 (with the aim of becoming law on this date).
The Bill, among other things, aims to provide businesses with the necessary breathing space and flexibility required to continue trading and to comply with their legal obligations in the current challenging conditions arising from the COVID-19 pandemic.
To achieve this aim, the Bill introduces a number of measures to provide companies with temporary relief from requirements relating to general meetings (including AGMs). Due to the restrictions on gatherings of people, companies are not in a position to hold physical meetings with their members at the moment.
Below is a summary of the key considerations relating to the conduct of shareholder/member meetings (including AGMs) taking place between 26 March 2020 and 30 September 2020 (the Restricted Period) (with the power of the Government to extend this period even further) and the implications of the imminent introduction of the Bill.
Extension of period to hold AGMs
If a company is obliged to hold its AGM during the Restricted Period (whether under company law or its constitution), the Bill enables a company to hold the meeting by 30 September 2020 (or any extended date). This gives companies more time to make appropriate arrangements for any AGM (including giving shareholders the appropriate notice (usually 21 clear days’ for a listed plc). However, there may be other matters that may still make it appropriate for a company to need to hold their AGM (or a general meeting) during the Restricted Period. The following should be considered if a company is planning to extend the date of an AGM:
- update the market with an announcement about the delay to holding its AGM (if the company is listed);
- consider the specific requirements of any resolutions passed at previous AGMs to determine whether authorisations granted at the previous years’ AGM will still be valid if the AGM is postponed to more than a year after the last AGM - generally authorities will expire at the earlier of the next AGM or 15 months when passed;
- the new remuneration policy will need to be approved by no later than the end of the company’s current financial year end;
- consider how to deal with dividends and whether an interim dividend payment to shareholders would be an appropriate solution rather than a final dividend; and
- the contract with the venue provider will need to be reviewed to avoid paying costs if the venue is not used.
If a company holds a general meeting during the Restricted Period, the Bill expressly permits for “Virtual only” meetings. A “Virtual only” meeting is where all attendees are in different places (connected through a video/tele conference facility) and voting being carried-out electronically or by other means. These provisions override any other law (or provision in a company’s constitution) that prevents a company from holding virtual meetings, so will give companies more flexibility when arranging member meetings during the Restricted Period.
The Bill will reduce the need for a company to hold a “hybrid” meeting (where the minimum number of attendees to form quorum have to attend in person and all other attendees vote via proxy and have access to the meeting by way of tele/video conference), so should simplify how a meeting can be held during the Restricted Period.
Additionally, the Bill will provide that members will not have the right to attend the meeting in person during the Restricted Period. The measures introduced by the Bill will not prevent shareholders from exercising their right to vote on resolutions or other matters brought before the meeting, however, shareholders may instead be required to vote by post or by electronic means to keep the number of persons physically attending a meeting to any required minimum.
The following should be considered if a company is planning to hold a “virtual only” meeting:
- whether to engage with key investors about how a meeting is to be held - some investors have raised concerns that a virtual meeting does not give them an opportunity to properly interact with a board face to face.
- the security of an electronic meeting needs consideration to ensure that a meeting is not hacked-into by unwanted participants.
- the platform that the virtual meeting is to be held on is robust to ensure a smooth meeting as well as being easy to use for all participants.
Meetings held from 26 March
The Bill provides for these measures to be retrospective from 26 March 2020 so that any company that has already had to hold a general meeting that complied with social distancing, but in turn did not meet the relevant obligations in their constitution, will have done so in accordance with the law.