COVID-19: Impact on AGMs

We consider how the AGMs of UK quoted companies will be affected

24 March 2020

COVID-19 will impact the AGM season, in terms of how and when AGMs are conducted. In this note we consider the implications for quoted companies in the UK and reflect the guidance recently published jointly by The Chartered Governance Institute and Slaughter & May, with the support of – amongst others – the Financial Reporting Council. A full copy of that guidance is available here.

Requirement to hold an AGM

Every public company must hold an AGM within six months of the end of its financial year. A private company which is a traded company (meaning a company any shares of which (i) carry rights to vote at general meetings and (ii) are admitted to trading in a regulated market in an EEA state by or with the consent of the company), must hold an AGM in each period of nine months following the end of each financial year. Private companies that are not traded companies are not obliged to hold AGMs, unless required to do so under their constitutions.

Given the extent of the current restrictions on gatherings (and the likely escalation of those) companies due to hold their AGM’s during the next few months will need to consider changes to their usual practice.

Potential approaches

There are a number of approaches which companies might consider adopting, albeit these are not exclusive and one or more may need to be adopted – depending on the company’s circumstances.

Adapting the current format

This is the most likely approach and key considerations include:

  • Encouraging proxy voting and facilitate on-line voting in case of postal service disruption;
  • Arranging satellite venues to restrict the numbers attending a particular location. The key is to ensure that shareholders attending via a satellite location are able to participate fully in the AGM. A company’s articles of association (Articles) may expressly permit this type of arrangement although there is case law authority to enable this where the Articles are silent; and
  • Livestream the AGM. Whilst this would not of itself constitute formal attendance at the AGM, it might be considered appropriate so as to allow shareholders to see and hear the presentations, questions and votes.

If the AGM notice has already been sent and there are to be changes to the published arrangements appropriate announcements (and website updates) should be issued, to inform shareholders.

The likely outcome for many companies will be the provision of satellite venues but this will not preclude the requirement for a physical meeting at a specified location, which shareholders will be entitled (unless prevented by government guidance or emergency legislation) to attend. In any event the company will need to ensure that the physical meeting is quorate.

There has been some suggestion that companies will convene 'virtual' AGMs, as opposed to the hybrid model suggested above. Whilst this is technically possible (and Jimmy Choo plc held a virtual AGM in 2016) this is not practicable unless the company’s Articles are specifically designed to facilitate this.

Delay convening the AGM

If a company has not yet issued its AGM notice it would be able (subject to the time limits set out at the top of this note) to delay its despatch and/or change the venue. If that is the approach taken and details of the AGM have already been publicised then an update announcement should be made.

Associated considerations include:

  • Check the expiry dates for annual authorities. These will generally expire at the earlier of the date of the AGM following their grant and 15 months from the date of grant. If these authorities expire that will impact the company’s ability to raise equity capital without returning to shareholders for approval.
  • Dividend payments. Final dividends will not be able to be paid on the expected date without the approval of shareholders in general meeting. It may be possible to consider the declaration of an interim dividend in lieu.
  • Remuneration policy. Companies required to approve a new remuneration policy at their 2020 AGM will have until the end of their current financial year to do so.

Postponement or Adjournment

If a company has already issued its 2020 AGM notice it can postpone the meeting, if its Articles allow it to do so. Subject to any express requirement set out in the Articles there is no minimum statutory period for rearranged meetings but as a matter of good practice companies should try to provide 21 days’ clear notice (albeit in the circumstances a shorter period may be acceptable).

If a company’s articles do not permit postponement it may consider adjournment. In that instance the AGM will need to be opened and then adjourned and it follows that a quorum will need to be present, unless the Articles provide for an adjournment by reason of lack of quorum.

The ability to postpone or adjourn is subject to the timing requirements set out at the top of this note.

Conclusion

We would expect the majority of AGMs this season to take a hybrid form – a combination of a physical and 'electronic' meetings. Companies which have already posted their AGM notices anticipating only a physical meeting will, if their Articles permit, be able to convert to a hybrid meeting. It is helpful in this regard that the FCA (in its Primary Market Bulletin published on 17 March 2020) acknowledged the need for flexibility in the context of shareholder meetings.

Given the current situation the best course of action will need to be kept under review and plans altered as necessary if and when additional government measures and/or emergency legislation is announced.

In the meantime engagement with, and the provision of information to, shareholders will be key.

For more information, please contact Rupert Weston or your usual Burges Salmon contact.

Key contact

Rupert Weston

Rupert Weston Partner

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