AGMs in the Time of Coronavirus - Practical Points
As the global pandemic turns corporate life upside down, how should shareholders and corporate executives handle the annual general meeting process right now, and for the next few months?
(This article has already appeared in the April 2020 edition of Executive Compensation Briefing, sister publication of this one.)
It is common for companies to hold annual general meetings at this time of year once the full-year results have been released. This year’s AGM season is like no other that business executives, shareholders and other participants have been through as a result of the COVID-19 pandemic. We have seen how a number of major banks in our industry have had to adapt. Meetings have been pushed back or held virtually to avoid human-to-human contact. This article explains some of the changes and what business leaders must continue to expect. The authors from CMS London are listed below. (As with all external contributors to these pages, the usual editorial disclaimers apply.)
If a company does plan to hold a hybrid AGM, it should ensure that it has the technological capability to do so. As with a physical AGM, arrangements should be made to ensure that shareholders can participate in the business of the meeting fully, including arrangements with its registrars to enable electronic voting and advance proxy voting facilities.
Directors should also consider how the chairman will control the meeting, how presentations will be communicated and how any documents required for inspection at the meeting can be made available if recommending to shareholders that they should attend virtually. Web-based conferencing systems frequently include the ability to share documents or presentations on a screen with conference call participants; that may be a cost-effective solution. Whatever the platform used, it is important that member participation can be contemporaneous, allowing members to debate, interrupt proceedings or raise points of order at any time during the meeting and allowing the chairman to react to issues as they occur.
The technology being used will also need to operate effectively across the range of different technology that members might use, such as desktops, tablets or smartphones; it must also be accessible for attendees who may have differing levels of technical expertise and there must also be a way to verify the identity of participants. A secure app, like the one used in the Jimmy Choo virtual-only AGM, may be an option.
Logistical and other considerations
Where companies are unable to hold a hybrid AGM this year or have already planned and given notice of a physical AGM, directors should ensure that they have considered what powers they have in relation to any last minute delays or adjournments to the meeting which might be out of their control, for example, as a result of the new government restrictions on travel and gathering size. For instance, venues booked for a physical AGM may be subject to temporary closures at short notice if a confirmed COVID-19 case is discovered prior to the meeting.
As well as considering the latest date a company may hold its AGM, directors must also keep in mind the expiry date of the current standing shareholder authorities, for example in relation to the allotment of shares and the disapplication of statutory pre-emption rights, as well as provisions in the articles requiring certain events to happen at an AGM, such as a requirement for directors to retire by rotation. Where a company’s articles require retirement by rotation and the company fails to hold an AGM by the last date on which it could have been held, some or all of the company’s directors could be deemed to have retired as at that latest date, even though the AGM was not held. Where this may be the case, directors should ensure that enough directors will remain in office if the company is unable to hold its AGM by the requisite time, or otherwise arrange for temporary new appointments to be made pending elections at a later shareholder meeting.
Notices of AGM
If a hybrid AGM is planned, the AGM notice should include sufficient information to enable shareholders participating electronically to be clear as to how they may attend, speak and vote. If relevant, shareholders participating electronically should be made aware of any discretion the chairman has to treat the meeting as continuing despite any technological failure, reminding them that the risk of losing their voice and vote in this way could be mitigated by voting in advance by proxy and by submitting questions prior to the AGM.
Any such announcement should give details of the remote access method by which shareholders may hear or watch the meeting, such as, for example, log-in details for an online conference call facility or a web platform on which the meeting can be live-streamed. Unless a company has authority to hold a hybrid meeting and the facilities to allow for electronic voting, the announcement should also make clear that shareholders’ formal participation for the purpose of the meeting will be by way of proxy votes cast or questions submitted prior to the meeting, and that the remote access arrangements are for information purposes only and do not constitute formal participation in the meeting.
After this article was written, temporary measures relating to the holding of AGMs were announced; these are dealt with in a separate article in this issue of ECB. As always, companies should, where necessary, take specific advice from their legal advisors and registrars, as appropriate.
James Parkes, Partner, CMS London;
Gary Green, Partner, CMS London; and
Alice Frydl, Associate, CMS London.