The 2020 annual general meeting (“AGM”) season is rapidly approaching, and one question that will most likely be at the forefront of directors’ minds is what contingency plans should they have in place for the AGM, in light of the outbreak of Covid-19 and the UK Government’s advice to follow social distancing and self-isolation?

Jack Kemmish, an Associate in our Corporate and Capital Markets team, sets out some thoughts and points for consideration by directors of UK public limited companies below, some of which The Chartered Governance Institute and a number of other organisations have recently considered[1].

Background

The requirement to hold an AGM is set out in the Companies Act 2006 (the “Act”).  A UK public limited company is required to hold its AGM within six months from the end of its financial year.  In order to hold the AGM, the meeting needs to be quorate. If the company’s articles of association are silent on the quorum requirements, two qualifying persons (as defined in the Act) must be present at the meeting for a valid quorum, unless they are both representatives of the same corporation or have been appointed as proxies by the same shareholder. The company’s directors typically attend the AGM, however in practice is not uncommon for the chairman and only certain directors (such as the CEO or chairs of committees), to attend.

Points to consider

Whether the company has called the AGM or is due to call the AGM, each company will need to consider its own individual circumstances, articles and any other relevant matters.

Can we postpone or adjourn the AGM?

Postponement

Once the notice of AGM has been posted, it is only possible to postpone the AGM if the articles allow.  If they do not, there is no statutory minimum notice period for rearranged meetings. If the articles do allow for a postponement, the company will need to consider the impact Covid-19 may have when choosing a new date (keeping in mind the statutory period for holding the AGM, as set out in the Act).

Adjournment

It is only possible to adjourn the AGM under common law (i) pursuant to the articles, (ii) by way of an ordinary resolution, or (iii) the chairman can adjourn if it is necessary to protect the safety or any person attending the meeting or ensure that the business of the meeting is conducted in an orderly manner. Even if the AGM is to be adjourned, it still needs to be opened. In practice, the meeting could be adjourned as soon as it is opened. The requirement to open the meeting presents its own set of issues in terms of physical attendance, which are considered further below. Again, directors should keep in mind the required period for holding the AGM, as set out in the Act.

If the meeting can’t be held at the planned venue because of closure, the company should announce the adjournment and arrange for representatives to be outside the venue at the time of the meeting to inform any shareholders attending in person.

On what basis should we adapt how we are holding the AGM?

• The company should check with the venue provider that the venue is still open and prepared to host the AGM. The company should also consider booking a second venue either as a back-up or, if the notice has not been posted, as the location for the AGM at the date of posting.
• The company’s articles may provide for the use of supplemental venues.
• Set up a dedicated area on the company’s website so that updated information on the AGM can be posted.
• Establish an online Q&A session for shareholders relating to the AGM, or, hold the shareholder event later in the year.
• Do not provide refreshments or any other complimentary offerings, before or after the meeting. Also, limit the number of non-shareholder attendees.
• Ensure that the meeting will be quorate in advance. If the quorum is not met, the meeting cannot proceed. Ideally the minimum number of required attendees should attend, with enough space between each person as recommended by the UK Government to reduce the chance of transmitting Covid-19.
• If the articles contain a provision permitting the directors to ensure the safety of attendees, consider measures such as temperature checks. Whilst physical contact such as handshakes is seen to be something to avoid, consider making antibacterial hand gel available, if possible. Make reference to these measures on the company’s website or in announcement (after consultation with your relevant advisers).

What if there is a delay in convening the AGM?

• If the company has not posted its notice yet, consider the latest date it can hold it, which is six months after the company’s financial year end.
• If the time and date of the AGM have been announced to the market and a delay in posting the notice is expected, consider releasing an update announcement.
• Check when the authorities approved at the previous AGM expire. These are sometimes granted to expire at the earlier of the next AGM or the date falling 15 months after the AGM they were granted at.
• If Listing Rule and DTR statements have been included in the report and accounts, these will need to be updated if the notice of meeting is issued more than one month after the report and accounts.
• It may be possible to avoid paying the costs for a booked venue if force majeure can be claimed.

Can we hold a virtual AGM?

• If the articles permit it, a part physical and part virtual AGM can be held. A virtual only AGM does not typically constitute a valid meeting. If a hybrid AGM is intended, an announcement should be released and the company should make shareholders aware that they can participate electronically.

Should we review or amend our articles now?

• A review of the company’s articles as to AGMs is recommended (given the uncertainty surrounding the timeline on when the social distancing and self-isolation measures will end). Directors should consider amending the company’s articles with a view to providing flexibility for the provisions in relation to AGMs, keeping in mind that any such amendments may still be subject to the points we consider in this note.

Further information

For any further information, or if you have any specific queries you would like advice on, please contact:

Jack Kemmish at j.kemmish@druces.com or +44 (0)20 7216 5528

Druces’ Capital Markets team is one of the top 20 law firms in the UK for Capital Markets work on the AIM market, ranked by the number of AIM-listed clients. Druces also acts for a number of companies listed on the Standard Segment of the Main Market, as well as companies listed on the Aquis Stock Exchange. 

This article has been prepared based on information available as at 19 March 2020, and is meant as a general overview only and should not be considered legal advice. If you have specific queries you would like advice on, please contact Jack Kemmish on the contact details set out above.

[1] AGMs and impact of Covid-19, Guidance Note, March 2020