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Apr 01, 2020

UK advisers issue further guidance for AGMs amid stay-at-home measures

Recommendations for compliance with holding annual meetings in line with government action to curb Covid-19 spread
The Chartered Governance Institute jointly with the Financial Reporting Council (FRC) has released updated guidance for companies planning their AGMs amid the spread of the Covid-19 pandemic in the UK.
The updated guidance, drawn up by law firms Clifford Chance, Freshfields Bruckhaus Deringer, Linklaters and Slaughter and May refers specifically to companies that do not want to delay their AGM – as provided for by the FRC’s previous guidance – while still complying with the UK government’s stay-at-home measures.
The guidance authors write: ‘Our earlier guidance note made it clear that postponement of the AGM is an option, and that remains the case. [But] given the uncertainty around the timeframe for resolving the current situation, companies will want to ensure their AGM authorities are refreshed before they expire, and there may be companies that need to hold a general meeting on an urgent basis to approve a capital-raising or other urgent transaction. It is therefore important that listed companies are able to hold a valid general meeting.’
Attendance at AGM
The guidance, reviewed by the Department for Business, Energy and Industrial Strategy (BEIS), offers suggestions for listed companies on how to comply with holding an annual shareholder meeting, as set out by the UK Companies Act. 
Attendance in person at a general meeting by a shareholder does not fall in the ‘essential for work purposes’ category, according to the UK government’s strengthened measures. While the stay-at-home measures are in force, it is advised that general meetings be held differently this year – where postponement is not possible – to protect stakeholders against the spread of Covid-19.
When the articles of association of a public company require more than two shareholders to be present for a meeting to be quorate, the guidance authors suggest one of the attendees ‘might be appointed as proxy for other members’ to comply with the latest UK measures. For example, the person who chairs the general meeting could be appointed as a proxy to vote on behalf of a stockholder. 
A limited number of issuers’ articles of association require the physical presence of more than two attendees to form a quorum. In such instances, the guidance notes the number of attendees ‘should be kept to the minimum necessary to enable the meeting to proceed… [and] all appropriate social distancing measures should be observed.’
The guidance also notes that it may be necessary to have additional personnel at the location of the meeting to ensure the safe operation of a webcast or ensure security, with numbers kept to a minimum and only where this is essential for work purposes.
The guidance authors add that ‘if the company’s articles allow the board to postpone the shareholder meeting or move its location to an alternative venue, they should consider exercising this power to move the meeting to a more controlled venue, such as the company’s head office.’
Opting for a virtual-only meeting
The London Stock Exchange (LSE) is backing temporarily allowing companies to hold their annual meetings electronically this year due to the pandemic. 
‘Given the unprecedented situation with Covid-19, the LSE supports time-limited measures enabling resolutions to be passed this year by proxy, electronic voting or through the use of virtual AGMs,’ a spokesperson for the exchange tells IR Magazine. ‘The LSE is engaging with stakeholders on behalf of the issuers listed on its market as to whether the authorities should consider time-limited exceptions for companies to have flexibility in how they conduct their AGMs during this period.’
Requirements for holding a valid general meeting are in part set out by UK issuers’ articles of association, notes the legal guidance. According to Victoria Younghusband, a corporate lawyer specializing in advising investment funds at Charles Russell Speechlys, the law in the UK gives flexibility for listed companies to hold a virtual AGM as a rule written and agreed for that option in the articles of association.
‘Companies incorporated in the UK have been able to hold virtual meetings since August 2009 as a result of section 360A of the Companies Act 2006 inserted by the Shareholder Rights Regulations 2009, which implemented the EU Shareholder Rights Directive,’ writes Younghusband in a blog post.
Ensuring shareholder rights
The Chartered Governance Institute’s joint guidance emphasizes that the companies should ensure investors receive as much information as possible and in time to enable them to participate in the meeting.
In the guidance, companies are advised to allow investors to submit their questions and cast their votes in alternative forms, such as electronically. ‘Companies may want to encourage the submission of questions for the board of directors in writing with the answers to be published in whatever manner companies determine – for example, on the company website,’ suggest the guidance authors.
Investment campaign group ShareAction has already raised concerns over holding remote annual general meetings during the Covid-19 pandemic. In a letter sent to BEIS, the lobby group asks the ministry to keep virtual meetings temporary. 
The group represents retail investors and is concerned that the move could prevent shareholders from holding companies to account, and potentially allow boards to cherry-pick questions, according to the letter.