On 20 May 2020, the Corporate Insolvency and Governance Bill (Bill) started its passage through Parliament, with the second reading expected to take place on 3 June 2020. The objective of the Bill is to help UK companies and similar entities to continue to trade during the current worldwide pandemic and to avoid insolvency. The Bill aims to achieve this through, amongst other things, temporarily easing company filing requirements, and requirements relating to meetings (including annual general meetings (AGMs)).
The effect of the provisions relating to meetings is that the Bill will allow virtual (i.e. electronic) meetings to take place even if a company’s articles of association does not currently allow this (which will be the case for most companies).
The Relevant Period
The easing of restrictions will only be temporary and will cover the period (Relevant Period) commencing on 26 March 2020 and ending on 30 September 2020. The Secretary of State may shorten the Relevant Period or extend it, but he may not extend it beyond 5 April 2021.
A company that is due to hold its AGM by a date during the Relevant Period (e.g. a company with a 31 December year-end that would therefore be due to hold its 2020 AGM by 30 June 2020) will now be permitted to hold its AGM by no later than 30 September 2020 (even if the Relevant Period is extended beyond that date).
Provisions enabling virtual meetings
The key provisions in the Bill relating to general meetings (including AGMs) are:
- The meeting need not be held at any particular place – in other words a meeting will not be invalid because the shareholders can participate in the meeting by logging on to a particular website (as opposed to attending at a particular (physical) address).
- The meeting may be held, and any votes may be permitted to be cast, by electronic means or any other means – in other words voting can be via a website and therefore a shareholder will not be disenfranchised by not submitting its proxy before the meeting.
- The meeting may be held without any number of those participating in the meeting being together at the same place - in other words, again, a meeting will not be invalid because shareholders can participate in the meeting by logging on to a particular website (as opposed to attending at a particular (physical) address).
Until the Bill is passed, a company will only be permitted to hold a virtual meeting if its articles of association permit this (and most companies’ articles do not currently permit virtual meetings to be held).
Physical meetings will be prohibited
The Bill states that a shareholder does not have a right: (a) to attend the meeting in person; (b) to participate in the meeting other than by voting; or (c) to vote by particular means. We await clarification of this provision, but it seems that during the Relevant Period attendance at physical meetings will be forbidden.
If that is correct then that amounts to a significant change in the law because market practice since the publication of the Stay at Home Measures has (in accordance with the guidance that has been given) been to convene a physical meeting (to be attended by two company employees) and encourage shareholders to vote by proxy. Market practice has also been to allow engagement between the board and shareholders by encouraging each company to allow questions by conference call and/or requesting question to the board be sent in prior to the AGM and publishing answers on the company’s website.
Although it is very likely that the Bill will be passed, it may not be passed in its current form. We therefore consider that each company should take a cautious view and continue the current market practice described above. This will still achieve the objective of holding an AGM that complies with all legal requirements (rather than risking relying on a bill which might not be passed in its current form). Therefore until the Bill is passed, we recommend that each company convenes a physical meeting (to be attended by two company employees) and encourages shareholders to vote by proxy.