During the COVID-19 pandemic, necessary director and shareholder meetings will be a key concern for many companies.
Shareholder annual general meetings and directors board meetings
There are a number of points for private limited companies to consider in light of holding annual general meetings and directors board meetings during this challenging time, some of which are set out in this guide.
Shareholder annual general meetings (AGMs)
The Companies Act 2006 does not require (and nor does it prevent) a private limited company from holding an AGM. Such companies will therefore only be required to hold an AGM if its articles of association or an agreement between its shareholders provide that requirement.
If the articles of association of a private limited company or a relevant agreement specify that an AGM must be held, the company cannot bypass this requirement by permitting decisions to be taken by the written resolution method instead.
This presents a difficult challenge for companies which are required to hold an AGM during the COVID-19 pandemic. The options available to such companies are:
- Consider alternative means of holding the AGM;
- Delay calling the AGM until the latest opportunity;
- Postpone the AGM if the company’s articles of association or a shareholders’ agreement specifically permit this;
- Adjourn the AGM; or
- Conduct a hybrid AGM if the company’s articles of association or a shareholders’ agreement specifically permit this.
The Companies Act 2006 permits shareholder participation at general meetings by electronic means. The Act does not specifically preclude a general meeting itself being held by electronic means, however, some provisions do indicate that some form of physical meeting is required. Nonetheless, Jimmy Choo plc did hold the first entirely virtual AGM in 2016.
Whilst not necessarily precluded in legislation, the articles of association of the company must be checked to ensure no provisions preclude a general meeting (or attending, speaking and voting at the same) from taking place by electronic means. The Model Articles adopted without amendment by companies incorporated on or after 1 October 2009 do not preclude this but the Table A Articles adopted without amendment by companies incorporated before 1 October 2009 do preclude it.
Whilst the Act and the Model Articles adopted without amendment do not preclude entirely virtual AGMs, many have questioned the validity of them and it is worth noting that an entirely virtual AGM is not common practice. It is likely that the government will publish guidance or new legislation addressing this grey area in due course.
Hybrid meetings, where a physical general meeting is held (whilst adhering to the government’s social distancing rules) but other shareholders are permitted to attend, speak and vote remotely, is an alternative. This is again subject to the provisions of a company’s articles of association or a shareholders’ agreement. As above, the Model Articles permit shareholder participation electronically but the Table A Articles do not. Irrespective of this, it is recommended that any articles of association or if applicable a shareholders’ agreement be amended to expressly permit hybrid general meetings if this option is chosen by a company. It may be that appointing a proxy from the same household as one of the shareholders assists in ensuring social distancing rules are complied with.
It is recommended that private limited companies seeking to hold virtual or hybrid AGMs should first obtain professional advice to assess the company’s articles of association and consider required amendments by written resolution.
During the COVID-19 global pandemic, it is recommended that AGMs be delayed and postponed (if permitted by the company’s articles of association) wherever possible.
Directors Board Meetings
The Companies Act 2006 does not contain specific provisions on how private limited companies should hold board meetings and the rules are instead contained in a company’s articles of association, unless those rules are overridden by a shareholders’ agreement.
The Model Articles adopted without amendment state that the means by which a director participates in a board meeting is irrelevant and not all directors need be in the same place. Therefore, unless a company incorporated on or after 1 October 2009 has bespoke articles, or amended Model Articles, which specifically forbid virtual board meetings or a director’s virtual participation at a board meeting, then virtual board meetings and participation will be valid.
The Table A Articles adopted without amendment state that directors are free to regulate proceedings as they think fit. As such, directors may decide between them that a virtual board meeting can take place and that directors may participate virtually in the same. This is slightly different to the position above and it is recommended that that a company incorporated before 1 October 2009 which has adopted the Table A Articles without amendment, has its articles amended to specifically authorise directors to hold virtual meetings.
No matter which situation applies in respect of virtual board meetings, other important provisions in a company’s articles of association and if applicable a shareholders’ agreement should be checked and adhered to regardless.
If you have any concerns regarding director and shareholder meetings or any other company related matters please contact a member of the Corporate team.
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