The coronavirus outbreak has upended the AGM season, which traditionally commences in April in the northern hemisphere. Many companies are grappling with whether to stage the events when most countries have restricted travel and banned mass gatherings, or to postpone the meetings until restrictions are lifted. We set out below, a summary of some of the issues that firms are facing.
Hold a virtual AGM or postpone the meeting
Whilst as a matter of English law, companies are able to hold virtual meetings without also having a physical meeting, very few companies do this.
To determine whether or not the relevant company is permitted to hold a virtual AGM, it is necessary to review the relevant articles of association, to check for any specific provisions prohibiting holding meetings electronically. Whilst companies could look to amend their articles to remove any restrictions, it is probably too late to do this in time for 2020 AGMs. Instead, companies will need to delay their meetings and make the relevant change in parallel. Alternatively, the government may look to introduce legislative changes to allow more flexibility in this regard, although the timing and likelihood of such changes are uncertain. Companies could also seek to postpone their AGMs in line with legislative requirements.
For further information on some of the corporate issues that arise in this context, our corporate team have prepared a useful note on virtual AGMs. The Chartered Governance Institute has also published guidance as to how listed companies incorporated under the UK Companies Act might implement contingency plans for AGMs in light of the compulsory ‘Stay at Home Measures’ that the British Government has introduced to combat the spread of Coronavirus.
Interplay with the Shareholders Rights Directive (SRD II)
The shareholder identification requirements set out in SRD II are due to come into force in September 2020. Therefore, if a company chooses to delay its AGM, it may be that by the time the meetings are held, SRD II is in force. There are a number of areas which are likely to be impacted by this:
- Maintaining shareholder rights and ensuring that no shareholder is disadvantaged. Companies need to ensure that shareholder rights are maintained and that there is no disadvantage for shareholders. Some of the factors that firms could consider including encouraging shareholders to:
- submit proxy votes instead of attending in person;
- clarify alternative ways for shareholders to submit questions ahead of the meeting, for example an updated online Q and A; and
- make arrangements for live streaming of the meeting (where it might be usual to expect a large turn out at the meeting), albeit this does not constitute attendance at the meeting.
- Facilitation of the exercise of shareholder rights. Article 3c of SRD II introduces requirements relating to the facilitation of the exercise of shareholder rights. To the extent the AGM takes place once SRD II comes into force, companies need to support shareholders to exercise their rights.
- Remuneration policy. Shareholders must be given the right to vote on the company’s remuneration policy and on the remuneration report at a firm’s AGM. The aim of this requirement is to try and create a better link between pay and the performance of company directors.