COVID-19: Green light for 'closed' company general meetings

General meetings: the proposed changes

The changes contained in the Corporate Insolvency and Governance Bill (CIGB) will, when enacted, allow companies and other qualifying bodies to hold 'closed' general meetings. CIGB contains the proposals on general meetings first announced by the Secretary of State for Business Energy and Industrial Strategy on 28 March 2020.

CIGB introduces the following changes:

• general meetings need not be held at any particular place
• general meetings can be held on a virtual basis - meetings may be held, and any votes may be permitted to be cast, by electronic means or any other means
• quorum requirements for a general meeting can be met without any members being together at the same place

A shareholder / member does not have a right to:

• attend the meeting in person
• participate in the meeting other than by voting or
• vote by particular means

For example, a company can simply provide for the chair of the meeting to be appointed as a proxy rather than providing for another person attending the general meeting to be appointed as a proxy as would normally be the case.

CIGB also makes it clear that these new rules will override anything in the articles of association or equivalent constitutional document.

These are very significant changes, which have the potential to have a negative impact on shareholder engagement. However to mitigate this risk, we anticipate that companies will continue to engage with shareholders despite this new flexibility. The FRC and BEIS Q&A document addressed this point in the following terms: 'For their part, we would expect companies to engage stakeholders prior to, during and following meetings including responding to shareholders questions sent in by electronic or other means. Any response could also be included in the minutes of the AGM. Companies should consider holding shareholder days later in the year, which will offer shareholders access to the board in a similar way to an AGM. This will maintain the dialogue between those shareholders who would normally attend and ask questions at an AGM.'

Are these temporary or permanent changes?

These are temporary changes. When enacted, the provisions in CIGB will apply to general meetings held between 26 March and 30 September 2020 (the relevant period). There is some flexibility and the relevant period can be shortened, or extended by up to three months at a time. The proposed longstop date is 5 April 2021.

Which bodies will benefit from this flexibility?

CIGB covers general meetings held by:

• UK companies (public and private)
• Building societies
• Registered co-operatives and community benefit societies
• Friendly societies and their registered branches
• Charitable incorporated organisations (including those registered in Scotland)
• Credit unions registered in Northern Ireland

What should we do next?

Companies and other qualifying bodies who intend to hold a general meeting in this period should:

• update their notice of general meeting to reflect these changes
• update their standard proxy form and in particular the notes
• plan their approach to shareholder engagement

We anticipate that the FRC and BEIS will publish best practice guidance on general meetings shortly. This is likely to update the Q&A on general meetings jointly published by BEIS and the FRC on 17 April 2020.

AGMs: extension

Companies, and other qualifying bodies, which were due to hold an AGM between 26 March 2020 and 30 September 2020 will be given until 30 September 2020 to hold their AGM. This may be extended by up to eight months.

What else?

We anticipate some minor changes are likely to be made to Schedule 14 of the CIGB before it becomes law. One important change will be to exempt directors from liability under section 171 Companies Act 2006 if they hold a general meeting which, whilst permitted by CIGB, is not in accordance with the constitution.

Our overview of the other key provisions of CIGB, including the new moratorium and restructuring plan, will be published shortly. It will also cover the temporary prohibition on winding up, the suspension of liability for wrongful trading and the prohibition on the enforcement of ipso facto clauses.

How can we help?