Of interest to those working in listed companies and others responsible for arranging meetings
On 14 May, the Financial Reporting Council and Department for Business, Energy and Industrial Strategy published a further set of Q&As. In order “to provide companies with additional information upon which to plan activities over the coming months, in respect of Company filings, AGMs and other general meetings during Covid-19 a further Q&A has been jointly produced by BEIS and the FRC”.
These expand on the initial Q&As published on 17 April and are much more closely linked to the new legislation which we expect to see published in Parliament in the next few days. It is still impossible to say when the new legislation will get through the Parliamentary process, and it must be possible that this will take longer given that it is associated with changes to insolvency laws. However, these further Q&As address a number of the most important issues that companies yet to hold their AGM will be considering and are clear on the direction that the Government intend the new legislation to take. As the announcement states: “Any legislation is subject to the approval of Parliament, but the announcement and the further detail provided in the Q&A below reflects what Government intends to deliver”.
Issues covered by the new Q&A include:
Which organisations and meetings are covered by the new legislation?
It will apply to companies, mutual societies and Charitable Incorporated Organisations and to all types of general meeting. It will not, necessarily, apply to shareholder authorisations obtained at a previous meeting.
When does the new legislation apply?
The legislation will apply retrospectively from 26 March. This is the first day of the emergency period when a company would have been statutorily required to issue notice of the meeting. However, the announcement goes on to state that until the Bill is passed into law, it cannot be assumed that this retrospective effect will be approved by Parliament. Consequently, we would strongly advise companies to take specific advice as necessary and to follow the Institute guidance issued in March.
A number of the other questions address this issue from other angles. For example, it will be necessary to give notice of a meeting if the last date for doing so is before the legislation has been passed, even if the plan is to postpone the meeting once it has done so, and meetings held on the basis of the new legislation before it has passed, cannot be assumed to be valid.
Will the new legislation override a requirement in our articles of association or constitution to hold a physical meeting?
Yes – on a temporary basis, but the Government will rightly expect companies and other organisations to make reasonable efforts to provide opportunity for engagement and challenge by all shareholders in advance of the AGM.
How long will these relaxations last?
The new legislation is expected to apply until the end of September to cover “the period within which the majority of companies and other bodies plan to hold their AGMs”. It may be extended in the event that the coronavirus restrictions are extended or reintroduced beyond that date.
How does this affect shareholder rights and directors’ duties?
As the document says, “These are unprecedented and uncertain times - the government’s primary concern in this extraordinary period is your safety and well-being, and that of the management and staff of the company in which you have shares, or society of which you are a member”. Members will retain existing rights, even if they are required to exercise them remotely. Directors should focus on safety and how best to fulfil their obligation to engage with members using methods that are consistent with the safety of members and employees, for example through the use of electronic voting, virtual meetings, conference calls, video calls, etc. “Shareholders or members should be encouraged to send in their questions prior to the meeting. Where possible these should be dealt with at, or prior to the meeting or failing that as soon as possible once the meeting has ended”.
The Government will publish guidance on good practice.
The full Q&A document can be found at: frc.org.uk/getattachment/3c2dcecd-b719-46de-82b3-38fcfa07a856/Updated-QA-AGMs-Final.pdf
