Company Shareholder Meetings – Physical, Virtual or Hybrid General Meetings
As government mandated restrictions on physical gatherings have come to an end, the possibility of in person meetings on a large scale has once again arisen. In a previous article, we considered the impact of Covid-19 on shareholder participation in general meetings and how e-voting could be used to combat this. As the rules, guidelines and attitudes now change (back towards a greater sense of normality) it is worth considering where this leaves us now, and what we can take from it all going forward.
Types of meetings
With the rise of virtual meeting software (such as Zoom and Microsoft Teams), it is no longer a given that holding a meeting will require all of its participants to assemble in one place. Virtual meetings (where participants communicate through a digital platform) are one option. So too are hybrid meetings, where some participants meet in the flesh whilst others join virtually. Of course, now that restrictions on gatherings have eased, face to face meetings are an option again too.
Physical general meetings
In the case of a physical meeting, all participants must be present at the same time and place. Anyone not there will not be able to participate and, if there are insufficient numbers present, the meeting risks being void for lack of quorum. However, those unable to attend themselves can still be involved in the conduct of the meeting by appointing a proxy to attend and vote on their behalf.
Virtual general meetings
In contrast, virtual meetings are held exclusively online, with nobody getting together in person. Quorum will be formed virtually and voting will take place virtually too. In order for a virtual meeting to be valid, along with the usual requirements, shareholders must be able to participate as though they were physically present. This means that they must be able to hear (although note there is no requirement for them to be able to see) what is happening, must be able to speak and must be able to vote.
Hybrid general meetings
Representing a blend of both physical and virtual meetings, at a hybrid meeting, some will attend physically whilst others will attend virtually. As such, quorum is considered on the basis of both types of attendee and any further requirements for a virtual meeting apply too.
Meetings during the pandemic
Up until 30 March 2021, the Corporate Insolvency and Governance Act 2020 (CIGA) expressly allowed meetings to be held by electronic means. However, there has been ongoing legal uncertainty over whether virtual only AGMs are valid (see below). This uncertainty, among other things, has inhibited the majority of companies from embarking on virtual only shareholder meetings.
What's Market has published an article on emerging trends from the 2021 annual reporting and AGM season for FTSE 350 companies including trends relating to the AGM format. Of the 202 FTSE 350 companies reviewed:
- 64% proposed a closed meeting with voting in advance by proxy only.
- 17% proposed a closed meeting with the option of voting electronically in real time at the AGM as well as voting by proxy.
The legal position
There are certain legal requirements for a virtual or hybrid general meeting to be validly held. Such requirement includes the ability of the shareholders (or their authorised representative, nominee or proxy) to participate in the meeting as if they were attending in person. Also, shareholders must be able to:
- hear the proceedings;
- speak and be heard at the meeting (and for traded companies, the ability to ask questions); and
- vote in real time using an online platform.
The provisions of Part 13 of the Companies Act 2006 (CA 2006) govern shareholder meetings and it was stated in section 311(1) of the CA 2006 that a notice of meeting must state the time, date and "place" of the meeting. It has not been settled whether a virtual platform constitutes a "place" and so uncertainty persists as to whether a virtual meeting can satisfy this requirement. This calls into question the legality and validity of a virtual meeting under English law. There is also legal uncertainty in relation to section 360(1) of the CA 2006 (electronic meetings and voting) and whether this section has the effect of overriding any provisions of Part 13 of the CA 2006 which would otherwise prevent a company from holding a virtual meeting.
The Financial Reporting Council (FRC) notes that it is working with the government to consider how clarity can be achieved on the interpretation of section 311 CA 2006. Industry bodies such as GC100 are also urging the government to provide clarity on this point. The Chartered Governance Institute UK & Ireland's long term policy objective is to persuade the government to introduce legislation to enable companies to hold general meetings flexibly. Until then, companies who are wishing to conduct virtual meetings should make sure that their articles of association:
- include provisions permitting electronic meetings; or
- do not preclude electronic participation at general meetings and that being present at general meetings does not require a shareholder to be physically present.
In respect of hybrid general meetings, there has been much discussion among industry bodies on whether the companies wishing to conduct hybrid meetings should have express provisions in their articles of association allowing for this. The Chartered Governance Institute UK & Ireland published its guidance for 2021 general meetings which suggested that companies were able to hold hybrid meetings even if their articles did not expressly enable this so long as their articles do not require that being present at a general meeting means a physical presence at a single location or prohibit electronic participation. However, it remains best practice to ensure that the articles provide for such hybrid meetings.
The flexibility afforded by virtual and hybrid meetings means that they will surely remain relevant moving out of the pandemic. However, in order to get the most out of these options, it would be wise to review (and potentially amend) the provisions of the company's articles of association to make express provision in relation to such (even if that means expressly prohibiting them). This has the benefit of providing greater clarity about what is allowed and offers the chance to exercise a degree of control over the process – helping to protect standards of shareholder participation. What those provisions ought to be will vary depending upon the specific needs of the company and its shareholders so there is no one size fits all solution.
For companies considering making express provision for virtual and/or hybrid meetings, GC 100 has produced a draft code of best practice regarding electronic participation at hybrid and virtual meetings (found in its discussion paper published in January 2021). GC100 intends to review and update the code as legislation and guidance on shareholder meetings becomes available and market practice develops. The following matters to consider are based on the version of the code included in the discussion paper.
|During the meeting||
Please do contact us if you would like any further information and advice in relation to holding general meetings and/or any other corporate governance queries.
- GC100's draft code – accessible here.
- FRC's Corporate Governance AGMs: An Opportunity for Change published in October 2020 – accessible here.
- Chartered Governance Institute's guidance note – accessible here.
This article is for general information only and does not, and is not intended to, amount to legal advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek independent legal advice.