Last week, ICSA (The Chartered Governance Institute) published a new guidance note on shareholder meetings under the Corporate Insolvency and Governance Act 2020 (CIGA). It has been drafted with a number of other organisations, with the support of the GC 100 (the Association of General Counsel and Company Secretaries working in FTSE 100 companies).
CIGA introduces various measures to enable companies and other legal entities to hold shareholders’ meetings on or before 30 September 2020 under a more flexible regime reflecting the disruption that COVID-19 has caused. The Government has the power to extend this temporary flexibility until 5 April 2021 at the latest.
The flexibilities introduced under CIGA are not mandatory, but directors may find them useful in planning how to hold shareholder meetings in the short to medium term. Where companies do intend to use the CIGA flexibilities, directors are strongly encouraged to consider beforehand the Best Practice Guidance for AGMs issued by the Department for Business, Energy and Industrial Strategy, and the Financial Reporting Council on 8 June 2020.
What are the key features of this Guidance?
- CIGA allows (but does not require) companies to hold fully or partially virtual meetings (with attendance and voting taking place electronically) without any requirement for a physical location for the meeting.
- In relation to quorum (minimum number of members required to validly conduct business), this also can be fulfilled by electronic means, without any members being in the same physical location.
- Companies can choose what method of communication to use for electronic meetings. It could include telephone calls or video conferencing.
- Regarding voting rights, companies can choose how members may exercise these. In practice, if attendance is restricted, members may be allowed to vote using the chair of the meeting as their proxy or may exercise votes using an online facility or dedicated app.
- CIGA provisions relating to flexibility in holding meetings automatically override any contrary provision in a company’s articles of association.
- CIGA applies retrospectively to all meetings held on or after 26 March 2020. So, as of 26 June 2020 (when the meeting provisions of CIGA came into force) any shareholder meeting that was held on or after 26 March 2020 is valid if it complied with the looser procedural requirements in CIGA.
- Regarding a company’s AGM deadline, if the deadline ordinarily falls on a date falling between 26 March 2020 and 30 September 2020, the AGM may be held at any time up to 30 September 2020. Consider carefully if planning to take advantage of this, as it will have knock-on effects on the expiry dates of corporate authorities (such as authority to allot shares) and this should be borne in mind.
- The flexibilities in CIGA in respect of increased flexibility for meetings apply to charitable incorporated organisations (including Scottish charitable incorporated organisations). However, they do not apply to other types of charitable organisations.
The ICSA Guidance is a useful summary of the issues, but directors, companies and their advisers will need to take account of the company’s specific situation, including the provisions of the company’s articles of association and any changes in the legislation or subsequent Government advice.