This advice was originally published on Friday 20th March, and updated 30 March 2020 to reflect further changes and guidance
How to handle your AGM given the impact of Covid-19
As the government ramps up its efforts to combat Covid-19, what is the impact on your AGM now that large public gatherings are banned?
What are the first steps?
Assess what your company’s articles of association allow you to do and in particular check whether hybrid/virtual AGMs are permitted? If so, this allows you to hold a meeting without a large physical gathering. Remember shareholders must be able to participate in the AGM online (ask questions, vote).
There will still need to be at least two shareholders physically present in order to make the meeting quorate – although these can of course be employee shareholders. (Note – a virtual AGM is different from a live streamed AGM where shareholders can listen in only).
If your articles allow you to run a hybrid/virtual AGM it is important to remember that every company’s approach can vary and there is not a one size fits all rule. We have included some examples at the end of this note of both a company in the middle of the AGM process when this has hit, as well as updates from some others where the process is imminent.
What can I do if the articles permit a hybrid or virtual AGM?
If your articles allow it and you choose to run a hybrid/virtual AGM, you will need to issue notice of your general meeting as per usual to shareholders and make clear that you are carrying out the AGM in a different format.
• Instructions for shareholders on how to access, speak and vote at the hybrid/virtual AGM
• Explain that votes are taken on a poll basis
• A helpline number for any technical issues/queries
You will also need to consider:
• In terms of running the AGM you will need to organise additional technology focused logistics. (Webcast hire, digital invites etc).
• Webcasting companies are facing huge demand due to the extent of home working, so early booking is needed.
What can I do if the articles do not permit a hybrid or virtual AGM?
These are the options:
• Shift the date of the AGM – If the notice of meeting has not been issued, you could move the AGM date later in the year, bearing in mind there is a six month deadline to hold the AGM after the relevant year end.
• Postpone the AGM – If the notice has been issued, you can postpone (if the articles allow you to do so) again bearing in mind the time deadline.
• Call the AGM and then adjourn it – If you have issued notice and you cannot postpone, the meeting must be held. The articles may allow you open the meeting (minimum 2 shareholder quorum) and then adjourn to a later date.
• Adapt the AGM – Look to revise the articles to permit a hybrid/virtual AGM but this can be a lengthy procedure; Encourage proxy submissions – make an RNS announcement ahead of the AGM to encourage shareholders to submit proxy votes, rather than attend.
Updated 30 March – updated FRC guidance
Updated guidance on how to hold an AGM given the impact of Covid-19 was published by the FRC and the Chartered Governance Institute on Friday 27th March evening. The full statement can be found here and this updated guidance supplements the initial guidance published on 17 March 2020.
The update clarifies that postponement of the AGM remains an option for companies. However, in the light of the government ‘Stay at Home Measures’, they suggest an approach for companies who do not wish or are not able to postpone. As before, companies need to consider their own articles of association first in deciding what course of action are possible. In summary, this guidance suggests that for companies who do not wish to postpone, they must:
• Keep shareholders fully informed of the company decisions regarding the AGM.
• Tell shareholders unambiguously that they cannot attend in person
• Encourage shareholders to vote by proxy
• Offer shareholders a route to ask questions and publish the answers (potentially via the website)
• The quorum for a general meeting of two members present in person can be satisfied by two directors and/or employee shareholders
• They deem that this would count as ‘essential for work purposes’ and therefore directors could legally travel to fulfil this requirement. All social distancing measures should be observed in this case.
• There is no legal requirement for other directors to attend in person and therefore they should not and companies should aim to include them via dial in.
It is also clear from announcements last week, that a fair number of companies have already decided to postpone and there is likely to be a rush of companies holding AGM’s in the second half of June. In our view, depending how long government restrictions remain in place, there may well still be a necessity to extend the 6 month deadline for holding an AGM post the company year end.
It’s been a long topic of debate as to how to transform AGM’s to be more relevant and useful for shareholders than the rather anachronistic format they have become. With many companies now moving to an electronic, hybrid or digital AGM this year or a separate call for shareholder questions, perhaps Covid-19 will be that catalyst for change?
Summary of FRC Q&A’s from Updated Guidance issues on 27 March 2020
1. Can a general meeting of a listed UK public company be validly held while the Stay at Home Measures are in force?
Yes, but general meetings will have to be held in a different way.
2. Are shareholders generally able to attend general meetings while the Stay at Home Measures are in force?
Not in person. Shareholders should be encouraged to vote by proxy.
3. Can a company prevent shareholders and proxies from attending a general meeting?
Yes. The chair of a general meeting of a UK public company has broad common law powers to preserve order at that meeting, ensure the safety of the attendees and allow the business of the meeting to be transacted. As the attendance of more than two people at a general meeting (other than where this is essential for work purposes) is not permitted under the Stay at Home Measures, the chair of a general meeting should exercise those powers to exclude excess attendees. This means that any of those whose presence is not ‘essential for work purposes’ should be excluded, once two people (including the chair of the meeting) are present.
4. How will a quorate general meeting be held, if shareholders are not able to attend?
The quorum for a general meeting is typically set out in a public company’s articles. The quorum might be achieved by, for example, an executive director and the company secretary being present at the general meeting, provided that each is a member, a corporate representative or appointed as a proxy. In extreme situations, this might be at the home of a director or employee, with that director or employee and a fellow householder (if not shareholders themselves) being appointed as proxies or corporate representatives.
5. What if the quorum requirement is more than two?
If some companies’ articles require more than two shareholders to be present for a meeting to be quorate, these members may typically be present either in person or represented by proxy. In this case, two natural persons will need to be present in person as described above in order to constitute a ‘meeting’, but one of them (for example, the person who chairs the general meeting) might be appointed as proxy for other members in order to fulfil the quorum requirement. If, unusually, a quorum requires the physical presence of more than two persons, then additional members or proxies may be required to attend in person.
6. Who will chair a general meeting?
The articles will determine who chairs a general meeting. They typically provide that the chair of the board or, in the absence of the chair of the board, another director shall preside as chair of the meeting.
7. Will the other directors be allowed to or expected to attend the general meeting?
There is no legal requirement for directors (other than those whose presence may be required to form a quorate meeting as described above) to attend a general meeting and their attendance would not be permitted under the Stay at Home Measures. It would, however, be possible as an option for them to dial in to the meeting if the company considers that this is helpful for running the meeting, although it is not required.
8. Where should general meetings be held, if the planned venue is unavailable or otherwise inaccessible?
• Companies that have already convened a general meeting for a venue that has since become unavailable will need to find an alternative venue.
• Companies that do not have articles provisions that enable them to postpone their meeting or switch to an alternative venue should, in law, adjourn the meeting from the planned venue to an alternative venue.