Directors and company secretaries of PLCs may be wondering how to deal with requirements to convene and hold shareholder meetings during the coronavirus pandemic.
This note is a reminder of the English law requirements on shareholder meetings, and how these may be met at a time when people are required to self-isolate even if mildly unwell and when restrictions on gatherings, travel and so on are imposed.
Are shareholder meetings necessary?
For public companies, even if not listed or on AIM, the Companies Act 2006 (CA 2006) requires shareholder meetings to take place (since shareholder resolutions can only be passed at a shareholder meeting). Also, the CA 2006 requires public companies (unlike private companies) to hold AGMs.
What is a 'meeting'?
In most cases, a company meeting will require the attendance of more than one person. There is case law confirming, for example, that one member present alone but holding proxies for each of the other members did not constitute a meeting. The quorum requirement should always be checked. For most UK PLCs, it is likely to be relatively low (invariably being two), and in some circumstances the CA 2006 expressly allows one person to constitute a meeting (for example, a reconvened class meeting can have a quorum of one).
Must the members be in the same physical location?
Outside the limited circumstances where CA 2006 states that one person may constitute a meeting, a company meeting will generally require more than one person to attend.
Can one or more of them attend 'virtually'?
Although a company's articles of association may have provisions which cater for 'virtual-only' meetings, in practice these are still rare.
Notice of Shareholder Meetings
For public companies, the notice periods are generally:
- in the case of an AGM, at least 21 clear days; and
- in any other case, at least 14 clear days.
Although articles of association of a PLC may require a longer period of notice, invariably companies do not deviate from the above.
It is important that companies comply strictly with the notice provisions in CA 2006 and any such provisions in the company's articles, because as a general rule, if the necessary notice period is not given, any business transacted at the meeting will be invalid. Helpfully, however, companies can rely on provisions in CA 2006 and their articles which deem notices to have been received by a certain time. This means that companies are not responsible (in the absence of major disruption e.g. postal services being materially affected), for making sure that the notice of meeting is actually received by the members.
However, given the difficulties that can arise with notice requirements, especially in a time of disruption, it is advisable for a company to allow a certain amount of leeway in the timetable for giving notice of company meetings.
As stated above, although companies may have provisions in their articles which cater for 'virtual-only' meetings, in practice these are very rare (investor guidelines, for those companies to which they are applicable, have recommended that a physical place for the meeting should be provided, where people can attend in person).
However, as the quorum requirements for UK companies are relatively low, in practice it should be possible to ensure that the quorum is met and the meeting can be validly held, even if the number of people attending is lower than usual. Companies will need to check that sufficient shareholders are definitely able to attend the meeting. Other shareholders can be encouraged to consider up to date health advice as to whether they should be travelling and attending such meetings (especially in view of the numbers of shareholders - and the typical age of shareholders - who attend), and can also be encouraged to appoint a proxy in advance of the meeting. Companies may also consider inviting questions from shareholders (with appropriate responses to be uploaded to a company's website) in advance of the meeting.
Boards may also want to consider the following:
• ensure that the registrars and the venue provider have appropriate arrangements/contingency plans in place;
• review the company’s articles of association as regards the chairman's powers to postpone and/or adjourn shareholder meetings; and
• keep under review, and update, the company's website (e.g. as to advice as to travel and attendance at the meeting, inviting questions in advance of an AGM, etc).