AGMs DURING COVID-19
Coronavirus and social distancing restrictions are impacting the manner in which companies are hosting their AGMs in this reporting season. Outlined below are some observations and considerations one should take into account ahead of upcoming AGMs.
What are the options available to companies?
- Conduct virtual meeting with no physical location
- Combine traditional physical meeting (with limited attendance) with electronic participation (Hybrid)
- Maintain status quo – suits companies with very low shareholder attendance typically
- Postpone to a later date within the prescribed 6-month period
There is no prescriptive approach as each company has a different set of variables to navigate, but as a starting point refer to your articles of association and speak to the General Counsel and ask: do we have provisions for virtual or hybrid format?
If the answer is YES, then you are in a minority of UK listed companies as historically, investors have been less than receptive to the idea of a virtual meeting (although investor sentiment has dramatically changed during this crisis) and this format was very slow to take off in recent years.
Those companies that received shareholder approval and amended their articles are now in a better position with added flexibility.
In reality, however, despite this option being available, many have not held a virtual or hybrid AGM before, so here is what to pay attention to:
- Are you going for a 100% virtual with no physical location AGM or a hybrid?
- Will it be audio only or video as well? (audio is undoubtedly easier and more cost effective)
- Will there be a live presentation or would a pre-recorded video address from the management work better? (can they do recordings from home?)
- Choose your technical partner very carefully to match your preferred format, as it can make or break the AGM. You should also make sure that it meets all necessary legal requirements. Many providers claim they can help but use the same technology as results webcasts and calls. AGMs are not open to the public and screening mechanisms should be in place to ensure that only shareholders attend (e.g. links sent out only after verification of share registration certificates etc.)
- Book the facility as far in advance as possible. With the peak of the AGM season approaching and with almost all investor communication taking place virtually, good providers are VERY busy, and operator managed calls are not as easily available as they were pre-COVID
- Make sure that your Notice of AGM has very clear instructions about how to join and participate in the meeting and how to vote
- Make it clear that all votes will be taken on a poll (not just previously submitted proxy)
- Remember that not all shareholders are tech savvy, so a helpline should be set up
- Have a backup plan in place to ensure no technical glitches (great story for social media to pick up on if there are any mishaps)
- If a Notice for a physical meeting has already been issued, it can be amended for a hybrid or virtual format and disclosed via appropriate channels
Other practical considerations:
- It is highly likely that large institutions will vote by proxy, unless there is an issue, but it is worth flagging ahead of time the planned format of the AGM
- Make sure management are familiar with the technology and how the e-AGM will be executed
- Have a dry run of Q&As and agree the protocol (do you need questions in writing ahead of the live event, or are you happy for an operator to invite participants to poll for questions live?)
- Lastly, in a case of the hybrid meeting, don’t forget that there still needs to be a quorum physically present (as per your article of association).
If the answer is NO, then you are like the majority of UK listed companies and can consider the following options:
One option, if the Notice of AGM hasn’t been issued and your article of association allows, is postponement. Companies can look to delay their AGM to the latter end of the prescribed 6-month period. This is a relatively straightforward process. However, there is obviously uncertainty as to how long social distancing measures will be in place. We have not seen many companies postpone thus far – although this may change. ICSA recommends a provision of 21 days’ notice period to shareholders but the articles of association will govern the process for each company.
If the Notice of AGM has already been sent out and your articles don’t allow you to postpone the meeting, then it is possible for the Chair to open the meeting and then immediately adjourn to a later date, providing there is a quorum. IR should work very closely with the General Counsel to ensure that all provisions under the Articles of Association are taken into account, given the advice issued by the Government on social distancing and large public events / gatherings.
Before this option is adopted, it is worth considering a number of factors, such as whether the new date is within six months of the end of the financial year, impact on dividend related dates (if the company is still planning to pay the dividend), reissuance of the Notice of AGM if it is delayed by more than 14 days, if the time limits granted at a previous resolution will expire before the new date (usually in relation to share buy-backs, pre-emption rights etc.)
- Go ahead (with a few adjustments)
No one knows how long the lockdown will last and it is important that meetings are still held to ensure that companies have authorities in place to operate and meet relevant legal deadlines. To this end, the majority of the legal advice we have seen is not to postpone or adjourn meetings, but to maintain the status quo with a few adjustments, such as:
- Under current stay-at-home measures, shareholders are unable to attend the AGM in person. However, they should be encouraged to vote by proxy
- Companies should make this clear by RNS announcement or by updating information on their website. Wording should be unambiguous and make it clear that anyone seeking to attend the meeting will be refused entry and that shareholders should vote by proxy. You should provide information about how to do this. You should also note that as the current situation is evolving, further announcements may be required
- You should also consider whether the submitted questions will then be published on the company website
- It is vital that the board engages with investors and other stakeholders through the most appropriate channels. Companies should ensure they are given as much information in good time to enable them to participate
- Current rules allow a public company to hold a general meeting ‘behind closed doors’, provided the other requirements of a general meeting are observed
- The quorum for a general meeting is typically set out in your articles. This may be satisfied by two directors and/ or employee shareholders of the company attending the meeting, with resolutions being passed by the proxy votes of those who have not been able to attend in person
- Some public companies’ articles of association require more than two shareholders to be present for a meeting to be quorate. However, these typically may be represented by proxy. If, unusually, a quorum requires the physical presence of more than two persons, then additional members or proxies may be required to attend in person
- For some companies, it may be necessary to have additional personnel at the location of the meeting, for example, technicians if there is to be a webcast, but this should be kept to a minimum
- In some situations, it may be necessary for the meeting to be held at another location. This might be at the home of a director or employee, with that director or employee and a fellow householder being appointed as proxies or corporate representatives
- All appropriate social distancing measures should be observed by the small number of attendees at a physical meeting. The meeting should be no longer than is required and if those attending are not from the same household, they should maintain the minimum degree of separation
- The Articles also determine who chairs the general meeting
- We would discourage other directors from attending a general meeting in the current circumstances. However, it would be possible for them to dial in to the meeting if the company considers that this is helpful for running the meeting