We have previously provided updates on how a company may co-ordinate general meetings during the Covid-19 pandemic thanks to the provisions put in place by Corporate Insolvency and Governance Act 2020 (CIGA). CIGA allowed companies to take a more relaxed approach in arranging general meetings as, notwithstanding their Articles of Association, companies could delay their general meeting and if it was held, restrict physical attendance. Members were also not entitled to vote in a specific manner (so companies could use online or proxy voting) and were not entitled to participate in the meeting other than to vote (which reduced the burden on companies to arrange Q&A’s on a virtual platform). There were several extensions of CIGA but the relevant provisions relating to general meetings ceased on 31 March 2021.
This puts companies in a challenging position given that there is no longer specific legislation applying to general meetings, but nationwide restrictions preventing social gathering remain in place. This note seeks to set out some practical guidance for companies holding general meetings in the remainder of 2021.
The first two key points to consider are whether:
- the company needs to hold a general meeting; and
- the general meeting can be deferred.
If your company is going ahead with a general meeting
The national restrictions limiting social gatherings are contained in the following regulations: Health Protection (Coronavirus, Restrictions) (Steps) (England) Regulations 2021 (SI 2021/364) ("Step Regulations").
In particular, Schedule 3 (paragraphs 1 and 3)is likely to be most relevant as it applies in the third stage of easing lockdown, which is envisaged to be 17 May to 21 June. The precise extent to which those provisions can apply in the context of general meetings is, however, unclear.
Where we refer to "guidance" below, much of this is legal comment and practical industry guidelines directed primarily at quoted companies, which doesn't have the force of law (in that it isn't statute or case law). However it is sensible to factor this into your planning. For example, it seems logical to proceed on the basis that a large quoted company (or indeed, a particularly well-resourced private company) will be expected to do more to accommodate member's participation than a small start-up private company.
If the meeting is held 17 May 2021 – 21 June 2021
Up to six directors/shareholders could attend the meeting within the restrictions in place during that period. Consider if this is suitable to:
- meet the quorum for your company; or
- allow attendance of all members.
If you wanted more people physically present at the meeting, consider whether you may be able to rely on the exception allowing larger gatherings which are "reasonably necessary for work purposes".
Whilst these rules are set out in the Step Regulations, unfortunately there isn't a definition of "reasonably necessary" or "work purposes". Therefore, reasonable judgements will need to be made and this will depend on who you envisage attending. If members hold offices (director, secretary) within the company and this forms part of their day-to-day job, this may be acceptable.
Based on the nationwide rules in place, guidance suggests that companies will be able to restrict physical shareholder attendance at meetings held 17 May – 21 June. Do note that companies should make provisions for circumstances in case restrictions ease early (however unlikely that may be) and, in that case, any/all shareholders should be able to attend in person if they wish to do so.
On the basis that a full in-person meeting cannot be held between 17 May – 21 June, what is a suitable alternative?
The hybrid meeting
Ideally, a company would hold what is known as a “hybrid” general meeting (unless this is prohibited in the Articles of Association). The key here is that whilst some members are present in person (usually a quorum), all other members can attend virtually and participate as fully as if they were physically at the meeting; they should be able to ask questions and vote in real time via a virtual platform.
Note that holding a "hybrid" general meeting doesn't, in usual circumstances, mean that companies can prescribe virtual attendance. However, where there are national restrictions preventing in-person gatherings, this would be the next best option.
The problem with this approach is that it can be quite difficult for some companies to arrange. A large public company with a lot of technological resources might find this easier to achieve, in contrast to a smaller company that has many shareholders.
The reduced meeting
What’s Market did a review of the FTSE 350 companies holding AGM's prior to 17 May 2021 and the majority intend to hold these on a closed basis i.e. no shareholders in attendance other than those required to form a quorum and voting by proxy only. Although restrictions will ease after 17 May to allow slightly larger indoor gatherings, it is generally envisaged that holding meetings on a closed basis from 17 May – 21 June is likely to be in accordance with nationwide restrictions. For ease, we will refer to this type of meeting as the "reduced meeting".
Guidance is that member participation should be proportionate in the circumstances. With that in mind, companies should consider whether they can:
- ask members to submit questions ahead of the general meeting;
- hold a separate and informal meeting either before or after the general meeting so that members can discuss issues;
- arrange for votes by proxy (with members appointing a designated person who will be physically in attendance);
- allow members to view the live meeting (though not participate) via video conferencing software; and
- do anything else to encourage participation by members.
The more companies can do to facilitate member engagement, the better.
If the general meeting is held after 21 June 2021
Guidance suggests that the meeting should be planned on the basis of the restrictions in place at the time of the notice. The options are therefore:
- to plan the meeting on the basis of the restrictions in place at the time of the notice. If the notice is being sent before 21 June, this likely means either a "hybrid" or "reduced" meeting, subject to the notes above. The information in the notice and covering letter will need to clearly state that if restrictions are eased as planned, shareholders may attend physically (and the company will need to accommodate this in practice); or
- to plan on the basis of a full in-person meeting with the option to scale this back (either to a "hybrid" or "reduced" meeting, subject to the notes above) if restrictions change.
On that basis, it would be sensible to plan the general meeting at a venue which can accommodate different capacities and preferably one which the company has control over (such as its offices).
Think about the timing of the meeting; it may be sensible to wait until July or August, if possible, so that the company has some leeway in changing the format of the meeting if the government's "roadmap out of lockdown" is altered last minute.
No matter which option the company elects, it's important to flag to members that there is the possibility of a change in format of the general meeting in the notice and other covering documentation. Unless required by Articles of Association, it's generally considered that changing the format of the general meeting doesn't require any kind of formal notice. Of course, any changes will need to be communicated to members in good time.
Companies may, in all circumstances encourage that, due to uncertainty, members may still want to appoint a proxy and attend virtually. Only where relevant restrictions are actually in place at the time of the meeting is it potentially possible for companies to prevent shareholder attendance. In doing so, the company will be relying on national rules (in the Step Regulations) and, in the absence of CIGA it is not entirely clear that this applies to prevent attendance at general meetings.
With that in mind, proceeding with a "hybrid" general meeting where members are told not to attend is not risk free and, using the "reduced" meeting option is even less so. Both options could be open to challenge by members(s) and, if any such questions arise, the company should be able to demonstrate it has done everything it reasonably can to allow member engagement. Whilst there is no guarantee that this will assuage any argument made by a member, it is certainly a good starting point.
There is no real precedent for how to act in the current situation, and, in the absence of CIGA, companies have to proceed in a way that (a) respects national restrictions in place under the Step Regulations (b) protects their members health and safety and (c) upholds members ability to participate in the general meeting.
If you'd like further advice on how to hold your general meeting as Covid-19 restrictions start to lift, please do get in touch and we would be would be happy to assist.