Throughout the COVID-19 pandemic, there was a relaxation of the rules around AGMs as a result of the Corporate Insolvency and Governance Act 2020 (CIGA).The flexibility allowed for meetings to be held in a closed format, not in a particular location and companies were given the ability to decide how shareholders could vote at meetings (for example, electronically, by a show hands or by proxy). On 30 March 2021, this temporary legislation expired leaving companies seeking advice as to what they now can and cannot do with regards to the formalities of holding meetings.
What now for Companies?
As in many aspects of life, that technology has been the solution to many hurdles that have been thrown in a company’s way during the pandemic. Not only has technology assisted with the continuity of day-to-day life but it has provided greater flexibility for many. In relation to AGMs, technology has led to greater shareholder participation in meetings as shareholders have been able to attend meetings from the comfort of their own home, without the need to travel long distances. As we transition into the new normal many companies have a desire to maintain this flexibility permanently in a virtual manner to encourage good shareholder engagement whilst moving with the times.
Current legislation does not allow entirely virtual meetings to be held (unless a company’s articles expressly permit otherwise) so at present, an alternative would be to hold 'hybrid' meetings that incorporate both an ‘in person’ element to form a quorum and a ‘virtual’ element to encourage wider participation. The Chartered Governance Institute (ICSA) has said that provided there is nothing within a company’s articles expressly prohibiting this style of meeting then there is no reason why a company cannot hold hybrid meetings.
The guidance provided by ICSA emphasises offering as much electronic engagement to shareholders including before, during and after the meeting to promote engagement wherever possible. Again, when considering the format of hybrid meetings guidance suggests that companies could consider offering aspects such as: live streaming the meeting with the ability to contribute to the meeting in real-time, an online question and answer session, in addition to holding webinars and events in person.
Can an AGM be fully virtual?
There is still uncertainty about the legality of entirely virtual meetings with regards to legislation, but there are likely to be two options going forward; a legislation change in the hopefully not too distant future may allow for this but in the meantime, a company can alter its articles of association to enable virtual AGMs to be held, providing that the necessary resolutions have been passed.
Is there anything else to be aware of?
In addition to the CIGA legislation, the pre-emption group guidelines were altered during the pandemic to allow for flexibility of shares to be issued, permitting the issuing of shares up to 20% of a company’s share capital free from pre-emption rights. However, this came to an end on 30 November 2020. As a result, from 1 December 2020, the guidance is that any authorities sought should revert to the position that is consistent with the Statement of Principles.
Are hybrid AGMs the way forward?
It is incredibly likely that hybrid AGMs will increase in popularity over the next year. However, it is important to note that companies must consider their individual circumstances and business needs as they may not be the most suitable option for all. They are however something that all companies should consider given that they have the potential to increase engagement and promote the inclusion of a wider population by creating greater flexibility and removing barriers that we didn’t realise existed prior to the COVID-19 pandemic.
