As Covid-19 continues to spread, companies with December year ends are increasingly asking themselves how to plan for this year’s annual general meeting. In the absence of any specific legislative solutions, it falls to companies themselves to take the actions that are appropriate for them and their stakeholders. Essentially, AGMs are the only opportunities for shareholders to question the board and hear the views of other shareholders.
With travel restrictions and bans on gatherings, companies are urging shareholders to check their websites for the latest on AGM updates. Imperative information that shareholders will notice, is the announcement to make aware that the AGM will not be held in the traditional outfit, instead, AGMs are now replaced with webcasts. In this article, we look at other AGM related issues and how Covid-19 is impacting AGMs around the world.
1. Shareholder Accessibility: While virtual Annual General Meetings (AGMs) symbolise greater convenience and accessibility, it also means that companies can avoid inconvenient questions easily. Unlike a traditional AGM which allows questions to be asked on the spot during an allocated time, this, however cannot be replicated for virtual AGMs. In a virtual AGM, shareholders are required to submit their questions in advance to the company by electronic means.
2. Instant Cost Advantage: By widening the opportunities for shareholders to engage virtually, companies can reduce the size, scope and cost for the physical part of an AGM. Often a challenge to estimate actual turnout, this inevitably result in over or under catering of seats and refreshments. In addition, variables that are a driving force for potential cost savings also include hiring a venue and gathering all the board in one physical location.
With the prevalence of virtual AGM solutions, many companies, however, are hesitant to conduct virtual AGMs. This could stem from a lack of confidence in rolling out something new. Should a virtual meeting fail, due to connectivity issues and unforeseen technology hiccups, an adjournment would be necessary and reconvening the virtual AGM could mean undertaking unnecessary inconvenience of updating press release and information circular (notice and access notification to shareholders).
Newly listed companies may see the benefit of utilising a virtual meeting solution but for more established companies, any slight shift towards virtual meetings could unsettle their entrenched shareholder base who may prefer traditional meetings.
In order to obtain on the ground sentiments, companies could adopt a staged approach first. This would involve hosting a hybrid AGM, a meeting that has both face to face element and virtual element. Hybrid AGMs would be an effective way of gauging how amenable shareholders are to the use of technology as, if the hybrid meeting was well received, this would make virtual meetings a little easier to implement.
It is important that a company checks its articles of association before conducting a virtual AGM. It is unlikely that the articles will expressly prohibit the holding of meetings in entirely electronic form. Some companies have append provisions in their articles enabling them to hold such hybrid meetings. Companies that have yet to include appropriate provisions in their articles allowing hybrid meetings should consider doing so, as immediate priority.
Shareholders must be able to both speak and vote at the meeting which will require the use of solutions that enable shareholders to exercise their rights . It is important that the chair of the meeting is also able to identify who is present. This is straightforward in a physical meeting however it could be problematic in a virtual AGM if the participant is not visible.
It is recommended that each attendee at the meeting is given a unique set of username and password for use when joining the tele-conference; this adds an extra level of security to the meeting. The technology should be tested in advance to ensure that electronic votes can be counted and that it accommodates the requirements set out by the company.
Despite a virtual environment, virtual AGMs will still have to adhere to the basic standard requirements relating to notice period, quorum and documents being displayed.
For companies whose articles incorporate the possibility for hybrid meetings, a series of considerations will remain.
1. Meeting the quorum: While many AGMs will probably involve members attending by proxy, a company will need to ensure that its quorum requirements , as laid out in its Articles, is met.
2. Voting: All shareholders are entitled to vote. If they are not able to attend the virtual AGM, strongly encourage them to make use of their right to submit a proxy to ensure that their voices are heard and that votes are legally watertight.
Given the rapid changing nature of Covid-19, this means that all companies required to hold an AGM in the coming months are compelled to review their arrangements and pivot online. Moving forward, companies will have a higher probability to consider proposing amendments to their constitutional documents to cater for hybrid meetings as a means of dealing with some of the practical problems currently arising from the need to hold a purely physical AGM. In this exceptional time, company directors and company secretaries will need to carefully think through in order to determine the most appropriate course of action.
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