Sanne Briefing Note
The UK Corporate Governance Code 2018 emphasises the importance of regular engagement with shareholders. As the global Covid-19 pandemic restricted businesses from conducting engagements in person, many companies opted for virtual AGMs in 2020.
The Corporate Insolvency and Governance
Act 2020 (‘CIGA’) provided temporary provisions allowing a virtual Annual General Meeting (‘AGM’) component. With provisions having expired on 30 March 2021, companies are still likely to face the same challenges as the previous year when it comes to managing AGMs and will have to be flexible in order to meet both legal requirements and health and safety measures.
The Chartered Governance Institute (ICSA)
“While the pandemic continues to have a destabilising impact on companies’ ability to plan, companies require the flexibility to hold AGMs and other general meetings in a safe and proportionate way. Our long-term policy objective is to persuade the government to introduce legislation to enable companies to hold general meetings flexibly.’’
If there is no specific legislation in force at the time of the meeting, such as national lockdown restrictions, the company will not be able to preclude shareholder attendance either entirely, or by seeking to impose a limit on the number permitted to attend. However, companies can strongly recommend that shareholders do not attend due to the unpredictable circumstances. Companies should bear in mind that the holding of a physical meeting may be more likely by July 2021 and/or the possibility that restrictions could still remain.
The options for 2021 AGMs are dependent on the prevailing situation at the time of the issuance of the meeting notice. Companies can legally organise hybrid meetings even if their articles do not expressly enable this, provided there is nothing in the articles which prevents their doing so.
Companies will need to balance the necessity for pragmatism in the light of Covid-19 against their regulatory obligations and good practice, suggesting that the optimum solution would be to maximize shareholders’ involvement in the meeting.
In the long-term, it is suggested that companies continue with physical meetings when it is safe to do so again. Companies should consider, with respect to their individual circumstances, whether it is appropriate to move to a hybrid AGM format, bearing in mind the importance of ensuring effective shareholder engagement. Companies who opt to hold a hybrid AGM should ensure that it that offers simultaneous in-person and online elements, as this will facilitate the greatest access to shareholders and enable even wider inclusion in AGM proceedings.
Companies will need to assess their appetite for future change to the format of their AGMs, and this will depend not only on costs but also on the relationship between companies and their shareholders, and the make-up of the shareholder register. Some companies have already made amendments to their Articles of Association to allow for greater flexibility in future, although this may not be straightforward, or possible, in all cases.
If boards opt to hold virtual-only meetings, they should clearly disclose their reasons and strive to provide shareholders with a meaningful opportunity to participate as much as possible, including being able to ask questions of directors and senior management and engage in dialogue in real time. Virtual AGMs can however only be held if articles clearly permit this.
Subject to Board consideration of the format of the meeting, Sanne can support companies with facilitating the technology through specialist providers and also assist with content, AGM rehearsals and Q&A handling pre, during and post-meeting.