Flexible approach required for UK AGMs in 2021, say experts

The Chartered Governance Institute (ICSA) said in a guidance note focusing on 2021 AGMs and the continuing impact of Covid-19 that closed meetings would not be legally permitted after 30 March 2021. This is when the Corporate Insolvency and Governance Act 2020 (CIGA), which enabled companies to hold AGMs much more flexibly, including holding closed meetings, expires.

In the absence of specific legislation or government guidelines in force at the time of the meeting, such as national lockdown restrictions, it would not be open to companies to prevent shareholder attendance either entirely or by seeking to impose a limit on the number permitted to attend.

Corporate governance expert Tom Proverbs-Garbett of Pinsent Masons, the law firm behind Out-Law, said: “Although it will not be open to companies to preclude shareholder attendance, a company can, and the tenor of the guidance is that they should, strongly recommend that shareholders not attend due to the ongoing unpredictable circumstances caused by the pandemic.”

The guidance says both institutional investors and the Financial Reporting Council (FRC) – while supporting the “do not attend” message to shareholders – will be expecting companies to maximise opportunities for shareholder engagement. The document includes good practice recommendations reflecting the expectations of the Department of Business, Energy and Industrial Strategy (BEIS), the FRC and major investor groups.

“The central point to be borne in mind is the need to ensure that shareholder engagement is as effective as it can be given the circumstances.” Proverbs-Garbett said.

“The guidance acknowledges that shareholder engagement can be undertaken in many different ways, but the overriding emphasis in on providing as much electronic engagement to shareholders as possible. This includes engagement before and after the meeting, as well as during the meeting either as a virtual hybrid participant or an observer. Shareholders should have confidence that they can engage with the business of the meeting without physical attendance,” Proverbs-Garbett said.

The guidance suggests companies could consider offering some or all of: an online question and answer session, webinars and town hall events, in each case ideally before the proxy deadline for the AGM; live-streaming the meeting, with a facility for asking questions in real time; and future shareholder engagement events, ideally with a physical presence once this is appropriate.

Both the resources offered and the format of the AGM will depend on factors including prevailing legislation or guidance at the time of the meeting, the company’s circumstances and shareholder wishes, stakeholder expectations, and the availability and reliability of the technology available. Past practice both before and during the pandemic, including how AGMs are generally run and attended outside the pandemic and the level of engagement with shareholders in 2020, should also be taken into account.

ICSA said companies could legally organise hybrid meetings – permitting both physical and virtual attendance and participation – even if their articles of association did not expressly enable this, provided there was nothing in the articles prohibiting hybrid meetings.

“There is no suggestion that companies must hold a hybrid meeting, just because they can. In each case, companies must consider, with respect to their individual circumstances, whether it is appropriate to do so, bearing in mind the importance of ensuring effective engagement with shareholders,” Proverbs-Garbett said.

The guidance said if a company is forced to change the format of a meeting after an AGM notice has gone out, it is not generally necessary to engage formal provisions in the articles and a public announcement via a regulatory information service should suffice.

Proverbs-Garbett said the guidance was comprehensive and gave a good sense in uncertain times of what can and cannot be done.

“The key message is to give investors access alongside their right to, at the very least, vote by proxy. Some form of Q&A will be the minimum expectation. ICSA hopes, along with most other groups involved – although investors remain lukewarm – that hybrid and virtual meetings become the norm, and so time spent re-appraising the format of the AGM will be well spent regardless of the pandemic,” Proverbs-Garbett said.

The guidance was drawn up by ICSA with the help of a working group comprising members of the City of London Law Society Company Law Committee and barrister Martin Moore QC.