Guidance on Temporary Measures for AGMs – an update for UK public companies

Further to the UK Government’s enactment of legislation on 23 March 2020 requiring all non-key personnel to “stay at home” (the “Stay At Home Measures”), The Chartered Governance Institute, with the support of various other entities including the Financial Reporting Council, the Investment Association and the Quoted Companies Alliance, has published updated guidance (the “Guidance”) on how UK listed companies should approach the planning of contingencies as they relate to the holding of annual general meetings while the current public health crisis subsists.

As the end date for this pandemic is at best uncertain, companies should be considering now whether they may need to hold a general meeting to refresh their AGM authorities before they expire, or to request shareholder approval for a capital raise or other transaction to buffer the financial health of the company for the coming months or in some cases on an emergency basis to ensure the viability of the business in the longer term.

While it is possible for some companies to hold a hybrid annual general meeting (“AGM”), as noted in our previous Law-Now, this may not be possible this year for many in the UK.

If it is not intended, or it is not possible, to postpone an AGM or to hold a hybrid AGM while the Stay At Home Measures remain in place, UK listed companies should take into account the reliefs provided under the Guidance in planning their AGM this year. AGMs held during this time should be valid and should not contravene the Stay At Home Measures as long as such meetings are held in line with the usual requirements under the Companies Act 2006 (the “Act”) and the provisions of a company’s articles of association (the “articles”), as temporarily modified according to the Guidance.

Physical Attendance

The Stay At Home Measures prohibit gatherings of more than two people unless such gathering is comprised of co-habiting people or where such gathering is for an essential work purpose. Key-personnel who are excluded from the Stay At Home Measures are broadly limited to those workers who undertake an essential function such as medical workers or workers in the food production and delivery or transport sectors, or those industries which may be required as ancillary to those essential functions.

While the Stay At Home Measures do not provide an exhaustive list of what would constitute an essential work purpose, for the protection of the health of the public as a whole, taking a common sense approach would mean that physical attendance at an AGM is not an essential work purpose unless such attendance is required to form the quorum for the meeting, and should therefore be discouraged.

The chairperson of the general meeting may, and in light of the current public health crisis and the Stay At Home Measures likely should, utilise the broad powers afforded to him/her pursuant to the common law (and as may be expressly set out in the articles) to exclude the attendance of any non-essential members or directors for the maintenance of order, security and the safety of attendees at the meeting and to ensure it is possible to transact the business of the company without undue delay or distraction.

As long as the minimum quorum requirement is met the AGM may be held behind closed doors, with those members not physically in attendance participating by proxy and sending in any questions they may have beforehand. Any directors not physically in attendance may dial in to take questions or to help run the meeting if necessary.

Quorum

Although provisions regarding the quorum for a general meeting may be provided for in the articles, under the Act two members who are present either in person or by proxy will typically form a quorum.

To achieve a quorum while staying within the restrictions of the Stay At Home Measures, either two director and/or employee shareholders may be in physical attendance, while all other shareholders not in physical attendance should vote by proxy or appoint one of the two attending shareholders as corporate representatives.

In certain cases, a company’s articles may require more than two people to form a quorum. If such quorum requirement allows members to be present either in person or by proxy, the guidelines set out above regarding two physical director or employee shareholders should be followed, with one of them appointed as proxy for any additional members required to form a quorum. Rarely, a company’s articles may provide that more than two members will be required to be physically present at the AGM, in which case the physical portion of the meeting should be limited to attendance by the bare minimum of people required to form that quorum.

Proxies

Shareholders should be instructed to make proxy appointments in favour of the “chairperson” of the meeting, rather than naming any specific person, to ensure all members’ proxy votes are validly counted, notwithstanding any last minute logistical difficulties or problems with availability that might result in a named person not being able to attend a modified AGM. If proxies have already been submitted naming a specific person as proxy, those shareholders should be encouraged to submit a new proxy form appointing the chairperson of the meeting instead.

Chairperson

Subject to any specific provisions in the articles, typically the chairperson of the board or another director may be the chairperson of a meeting, in which case it would be prudent to ensure that one of the physical attendees of the meeting is a director. However, in some cases the articles may also allow for a non-director member to be elected to chair the meeting by way of a resolution of the company passed at that meeting.

Venue

If an AGM venue has already been booked, companies should check with venue providers whether they are still available, as they may now be closed or temporarily unavailable due to the Stay At Home Measures. If a venue is no longer available, subject to any restrictions in the company’s articles, an alternative venue should be chosen.

Options for alternative venues might include the head office of the company or the home of one of the director or employee shareholders. In the latter case, where the members who are to form a quorum for the meeting are not co-habiting, it may be necessary to appoint a fellow householder as proxy or corporate representative, notwithstanding the fact they may not be shareholders themselves.

Where a company’s articles do not allow for a meeting to be postponed or for a meeting venue to be switched, the members forming the minimum quorum should meet at the closest point to the original venue (outside the door should be sufficient) before adjourning the meeting to an alternative venue to carry out the meeting as set out above. We are aware of meetings (particularly where the matters to be considered are relatively short) having been held in full outside the original venue.

If none of the alternatives suggested above are practicable, advice should be taken regarding the best and safest course of action for all of those who will need to be involved in the meeting, keeping in mind the Stay At Home Measures.

Notices

Companies should ensure that the notice of AGM to be circulated, or, where a notice has already been circulated, updates to shareholders via an RIS announcement and the investor relations section of the company’s website, includes the following:

• an explanation to shareholders that they are not allowed to attend the AGM in person due to the restrictions on the size of public gatherings pursuant to the Stay At Home Measures and that any member attempting to attend the meeting in person will be denied entry, ensuring that this message is conveyed in the most robust language;
• that shareholders should participate by:

1. voting by submitting their proxy form which should specify that the “chairperson” of the meeting be appointed as their proxy; and
2. submitting any questions they have beforehand in writing (for instance by email to a designated email address or through the company’s website);

• the details of the new venue if that has had to be changed, making clear this is for shareholders’ information purposes only and reiterating that they should not attend this new venue in person; and
• a note that as the situation evolves further notices or announcements may become necessary.

Social Distancing Measures

For the essential physical attendees of the AGM, care should be taken to ensure that social distancing measures are observed, such that the meeting does not go on for longer than necessary to deal with the business of the meeting, and if the attendees are not living in the same household, ensuring the recommended minimum physical distancing is observed at all times. This will be especially important in those rare cases noted above where a quorum requires the physical presence of more than two people, or where technicians or security staff may be required to ensure the proper conduct and safe operation of the meeting.

Conclusion

Companies should ensure they have checked the provisions of their articles for any bespoke restrictions to which the company may be subject, and continue to communicate with their registrars, venue providers and advisers as relevant. Shareholders should be updated on a regular basis on how the company will ensure they can participate in the decision making of the company. Where companies have individual circumstances which may affect the way in which they may incorporate the Guidance when planning an AGM this year, they should take specific advice from their legal advisers and registrars, as appropriate.

If you would like to discuss any of the above, please contact James Parkes, Alasdair Steele or your regular CMS contact.