The Covid-19 crisis has had far reaching effects across the whole of society. The recent lockdown, and the requirement for social distancing, has meant that companies have had to consider whether they can still hold valid meetings of their shareholders and what form these might take.
The UK Government recognised that this was potentially problematic and recently enacted the Corporate Insolvency and Governance Act 2020 which has (among other matters) sought to address the issues in this area.
Requirement for a Shareholders’ Meeting
As a starting point, there is no legal requirement for a private company to hold an annual general meeting (AGM) of its members/shareholders, unless its constitution so stipulates. A public company must however hold an AGM each year within the period of 6 months starting on the day after its accounting reference date.
While remote/virtual meetings of directors have become commonplace in recent years, meetings of shareholders have still tended to be held in person, with members physically present.
Wholly Virtual Meeting and Hybrid Meetings
Companies have been permitted to hold wholly virtual meetings of shareholders since 2009. The members do not attend a physical location but instead join remotely via video-conference or some other technological means. Jimmy Choo has been one of the most high-profile (and some might say well-heeled) companies to hold a completely virtual meeting, but there has been some debate as to whether it is competent for a company to do so if its articles of association do not specifically provide for this. Jimmy Choo had amended its articles to specifically allow for holding a wholly virtual AGM.
One concern has been whether a virtual meeting can satisfy the requirements in the Companies Act which provide that the notice of a meeting must stipulate the place, date and time of the meeting. Some have taken the view that this suggests that there has to be a physical location for the meeting.
Certain companies have sought to guard against the uncertainty surrounding the validity of a wholly virtual meeting by holding a ‘hybrid’ meeting. This involves convening a physical meeting, which might only include 1 or 2 members physically present at the relevant location, with the remaining members joining remotely.
However, the Corporate Governance and Insolvency Act 2020 overcomes the concerns around wholly virtual meetings, at least temporarily.
Corporate Insolvency and Governance Act 2020
This Act recently came into force and made a number of changes designed to afford companies greatly flexibility as to how to hold meetings during the pandemic. The legislation overrides any provisions in a company’s articles which might have prevented holding a wholly virtual meeting.
The provisions in the Act currently run up until 30 September 2020, although that period may yet be extended by periods of 3 months, up to a final longstop date of 5 April 2021. The provisions of the Act, although only coming into effect in June 2020, apply retrospectively from 26 March 2020. This means that if a company held a virtual meeting in contravention of its articles, but in accordance with the Act, it will be regarded as having been validly held.
Extended time to hold AGMs
Any company that was required to hold its AGM in the period between 26 March 2020 and 30 September 2020 will be able to postpone holding it until 30 September 2020.
The Act makes it competent for a company to hold a wholly virtual meeting of the shareholders, without the requirement for there to be attendance at a physical location. Votes can be validly cast by members and the requirement for a quorum will be met even if the requisite number of people are not physically present in one location.
However, once the grace period provided for in the Act comes to an end, companies will need to ensure that their articles of association allow for virtual meetings or consider holding hybrid meetings to remain compliant.
The unprecedented situation created by the Covid-19 crisis meant that the Government had to enact temporary legislation to address the problems created by the lockdown and continued social distancing. Blackadders’ corporate and commercial team is on hand to assist in the organisation of your company’s meetings and related matters during this time and beyond.
Corporate & Commercial
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