The COVID-19 pandemic has led many UK-listed companies to consider other ways to hold their general meetings, including options for allowing remote participation in future meetings.
The Corporate Insolvency and Governance Act 2020 introduced temporary relaxations to meeting attendance requirements, overriding provisions in the articles of association of UK companies (Articles) and effectively allowing closed meetings. Those temporary measures have now ended, and UK companies must consider whether they would like the flexibility to hold virtual and hybrid meetings in the future. For many companies, changes to their Articles will be required in order to enable virtual and hybrid meetings.
Guidance in this area was given in January 2021 by GC100, a group representing the general counsel and company secretaries of the UK’s largest public companies (the GC100 Guidance), and in February 2021 by the ICSA and the City of London Law Society, supported by input from Martin Moore QC, the Department for Business, Energy and Industrial Strategy, the Financial Reporting Council, the Investment Association and the Quoted Companies Alliance (the ICSA Guidance).
Hybrid meetings compared to virtual meetings
The distinction between a virtual general meeting and a hybrid one is that a virtual-only meeting envisages that all eligible members attend via electronic means only (be it via tele-conference or videoconference). A hybrid meeting will have a certain number of members present physically, and the opportunity for other eligible members to attend via electronic means.
Can a UK plc hold a purely virtual meeting?
There was a pre-pandemic example of a company holding a purely virtual meeting. In 2016, Jimmy Choo plc held a virtual annual general meeting of shareholders (AGM) in accordance with enabling provisions in its Articles. It was the first of its type in the UK and remains, to a great extent, an outlier. The reasons for this are:
- As noted in the ICSA Guidance, there remains some legal uncertainty as to whether a wholly virtual meeting constitutes a valid meeting, including whether the Companies Act 2006 requires a ‘place’ of meeting;
- Various investor groups are opposed to purely virtual meetings and want companies to offer a physical place of meeting, so that investors can meet and address the entire board. Some investor bodies have recommended that their members vote against any proposal to change the Articles to permit wholly virtual meetings; and
- The Jimmy Choo AGM was a good example of the considerable expense and planning required, including the creation of a fully tested AGM App which was available across all platforms, and the further creation of a specific platform containing unique log-ins for all members.
Bird & Bird is not recommending that its clients hold purely virtual meetings for these reasons.
Do a Company’s Articles need to be amended to permit hybrid meetings?
The ICSA Guidance concluded that companies can legally hold hybrid meetings, even if their Articles do not expressly enable this, provided that their Articles do not:
- require that being present at an AGM or other general meeting means physical presence at a single location; or
- prohibit electronic participation.
This is the case even if a company’s Articles do not specifically address hybrid meetings. Companies’ Articles should be checked to ensure that they do not contain provisions which preclude the holding of a hybrid meeting.
In practice, many companies have introduced or are introducing new provisions into their Articles to specifically permit hybrid meetings and to set out some of the procedural matters relating to the holding of those meetings. This is recommended by the ICSA Guidance to ensure certainty over the procedural mechanics. As of 29 November 2021, 92 FTSE 350 companies had proposed amendments to their articles to permit shareholders to attend and participate in AGMs electronically.[1]
It is also important to provide for what happens if there is a failure of the technology used for allowing virtual attendance at the meeting. Typically, this requires a review of the Articles in their entirety, the insertion of a new article dealing with hybrid meeting procedures and various corresponding changes to other articles.
What are the requirements for a valid hybrid meeting?
From the ICSA Guidance:
- Participants at a hybrid meeting must have the ability (whether attending the physical place of meeting or attending by electronic means) to participate in the meeting on an equivalent basis.
- All those participating (whether physically or electronically) must be able to vote in real time at the meeting, hear the proceedings of the meeting, speak and be heard at the meeting.
- Companies should also consider provisions in their Articles, if any, with respect to how this is expressed in further detail.
- In each case, shareholders should be treated fairly across the physical and electronic formats.
The Financial Reporting Council (FRC) is planning to publish best practice guidance on conducting virtual and hybrid meetings shortly.
Should my company hold a hybrid AGM?
It is important to note that the provisions in the Articles setting-out the procedural mechanics for hybrid meetings do not require companies to actually hold hybrid meetings. Instead, they are drafted to be enabling. When it comes to holding future general meetings, companies should consider both the cost and management time associated with organising a hybrid meeting.
A September 2020 poll conducted by GC100 indicated that its members had key concerns in relation to hybrid meetings, including the cost and the added risk and complexity inherent in these kinds of meeting. It was clear from the poll that hybrid meetings were unpopular and, to the extent they were being held, were proceeding more as a matter of necessity than desire. Member feedback indicated that, by combining a physical meeting with electronic participation, hybrid meetings represent “the worst of both worlds”.
Balanced against this, we have the unique experience of the recent pandemic, which has highlighted the need to have the flexibility to enable meetings to be held in extreme circumstances.
2022 AGM season
As of 12 April 2022, 107 FTSE 350 companies have issued notices of AGM. Of these companies:
- 77 are holding physical, in person meetings (some of which have restrictions in place on how many people can attend due to covid concerns, whilst other companies are requesting that attendees observe social distancing during the meeting in order to restrict the spread of Covid-19);
- 29 are holding hybrid meetings; and
- 1 is holding a fully virtual meeting.
Interestingly, of the 77 companies that are holding physical, in person AGMs, 12 have issued notices actively discouraging physical attendance at the AGM; some have even suggested voting in advance and following the AGM virtually.
For further information, please contact:
Clive Hopewell, Partner, Bird & Bird
clive.hopewell@twobirds.com
