Last May, in the midst of the first lockdown, we examined the impact of social distancing on companies holding annual or other general meetings. Almost 12 months on, as the third lockdown begins to ease and restrictions are subject to regular changes, the issue remains a pertinent one.
The flexibility provided by the Corporate Insolvency and Governance Act 2020 (CIGA) for companies to override their constitutions and the provisions of the Companies Act 2006 when holding meetings during the pandemic will fall away on 30 March 2021, raising questions over how to proceed from that point where social distancing rules are still required.
To that end, guidance has been issued recently by the Chartered Governance Institute (ICSA) on how they can be organised as 2021 unfolds.
As we explained last year, a Board should first look at the company’s Articles of Association to confirm how and when shareholders meetings take place, how they are constituted, who may attend and vote etc. This will help ensure that any decisions made cannot later be challenged as being either improperly arrived at or, in some way, procedurally defective.
Throughout the course of the pandemic, companies have had to think creatively in how they deliver general meetings remotely and, for many, this process has proved beneficial to them. However, for others, the limitations have presented difficult but necessary challenges.
The guidance suggests that for the time being, meetings should be held on a ‘closed’ basis (i.e., with limited number of shareholders attending to form a quorum whilst the rest vote by proxies). This is expected to be the case until at least 17 May and, depending on progress made to reduce the number of COVID cases, may continue until 21 June.
From that point on, provided that their articles of association allow, companies can begin to plan once again for physical or hybrid meetings with limited attendance and the possibility of using larger venues as and when then public health situation improves. All in-person meetings must be arranged in accordance with the ongoing health and safety measures.
As the pandemic continues, companies can recommend that shareholders do not attend general meetings but vote by proxy. However, once the flexibility provided by CIGA expires, companies should not limit the number of shareholders who may attend the meetings. A company can refuse further admittance to any meetings already in progress and at capacity (based on the governing rules of public gatherings at that time) but cannot do so in advance of a meeting.
The guidance offers good practice recommendations as to the holding of hybrid meetings which seem the most practical solution from the 30 March until further governmental guidance or legislation is in place. Importantly, those participating in a hybrid meeting must be allowed to do so on an “equivalent basis” and be able to vote in real time at the meeting. Audio functionality must also be incorporated in order to constitute a valid hybrid meeting and to enable participants to fully contribute.
Hybrid meetings can be held if the company’s articles do not: (i) require that being present means a physical presence at a single location; or (ii) prohibit electronic participation. This is the case even if the articles do not specifically address hybrid meetings. It may be advisable, however, to amend the articles to specifically allow for hybrid meetings and take into account any potential contingencies such as technical failures or the need to adjourn the meeting due to public health concerns.
Between closed and hybrid meetings, there are a number of alternative options available depending on the specific circumstances of the company concerned and the interests of its stakeholders. However, the recommendation of the guidance is to ensure that as much as proportional and reasonable in the circumstances, arrangements lean towards the hybrid model.
