Communicating electronically with the members of a company can be helpful for a range of reasons, not least because it is probably an easier, faster and cheaper alternative to hard copy correspondence. Where communications are governed by the company's Articles of Association or the Companies Act 2006, certain formalities need to be observed with respect to electronic methods. This note summarises these and contrasts this position to that of informal communications.
Articles of Association
In the first instance, the company's Articles of Association ("Articles") should be consulted to check provisions relating to electronic communication between the members and the company. The Model Articles do not allow for electronic correspondence, however, any amendments made by a company to the Model Articles, or indeed any bespoke Articles, may regulate electronic communication in some way. Such provisions could apply to communication from the company to its members and from members to the company.
If the Articles permit electronic correspondence, the company may communicate in the way stipulated. If the Articles prohibit electronic correspondence, and the company wishes to change this, shareholders' approval by way of a special resolution is necessary. A board meeting will be required to implement the updated articles, and these should be filed, along with the special resolution, at Companies House.
Where the Articles do not give a definitive answer, the Companies Act 2006 ("CA 2006") sets out criteria for permitting electronic correspondence.
The Companies Act 2006
Company to members
Companies are allowed to send information to a member electronically where the member has consented and provided an email address. It should be noted that the email address must have been given for the purpose of electronic communication and cannot just be one generically held on file. Such correspondence might include notices, ballot papers and other documents related to general meetings.
A member is still entitled to receive the document by hard copy if they make a request within 21 days of receiving the electronic communication. A company cannot therefore assume that the need for posting hard copies will entirely be eliminated.
A company may supply information to members (such as accounts) by way of its website, if the members are deemed to have agreed. Normally, this means that a provision to this effect is included in the Articles, or that members have made an equivalent resolution. The company is still required to request individual members agreement, and so those who disagree must notify the company within 28 days of that request.
Where new shareholder documents are to be posted on the website, members must be notified. Therefore, the company will need to be able to email the members to alert them of this.
Members to company
Members may validly send communications to a company electronically where the company has agreed and supplied an email address for this purpose. The company's agreement may be to a single specific communication or to all communications generally.
Where a company has sent out a notice for a general meeting to it's members (either by electronic or hard copy), and provided an email address, it will be deemed to have agreed for correspondence relating to that meeting to be returned to that email address.
The requirements set out above are relevant where a company is making formal communications to its members, and vice versa. That approach applies to:
- documents including summons, notice, order or other legal process and registers
- communication authorised or required by the CA 2006 (such as sending out accounts ahead of a general meeting)
Where a company wishes to communicate with its members on matters which fall outside of those two criteria, it may do so without reference to the procedures set out under the CA 2006. Such communications may include a general update about the company (informing members of internal promotions, lateral hires or a successful deal) or a response to social or economic conditions (this could include policies about steps the business is taking to deal with challenges like the coronavirus).
The approach regarding informal communications from the shareholder to the company is the same. Unless the communication is in reference to one of the specified documents or authorised or required under the CA 2006, a member may just email the company without the need to worry about procedures under the CA 2006.
Any Articles surrounding communication are likely to only be with reference to those governed by theca 2006. Due to this, it is probable that electronic informal communications are also permitted under the Articles.
In summary, electronic communication between members and a company is only regulated by the CA 2006 in certain circumstances. Electronic communications in relation to formal matters will be valid in circumstances where it is allowed by the Articles, or where the member and company have provided consent along with an email address.
For communications falling outside of those set out in the CA 2006, the company and its members may correspondence freely in the manner they choose.
If you would like advice on how to correspond with your members, or regarding any other matter of company law, please get in touch and we would be happy to assist.