Crisis response or road to recovery?
In our briefing COVID-19: What does this mean for AGMs?, we considered a number of issues with which companies with December 31 year-ends have been grappling.
Available options for UK-listed companies to consider as part of their AGM contingency planning were discussed in initial guidance published by the Institute of Chartered Administrators and Secretaries (ICSA) on March 17, 2020.
In light of the compulsory Stay-at-Home measures implemented in the UK, which include a ban on public gatherings of more than two persons, ICSA published supplementary guidance for UK-listed companies (Guidance) on March 27, 2020. This was endorsed by bodies including the Financial Reporting Council, the Investment Association and the GC100 and was reviewed by the Department for Business, Energy and Industrial Strategy.
On March 28, 2020 the Business Secretary announced that legislation was to be introduced to allow companies to hold their AGMs safely, consistent with the current restrictions on movement and gatherings. The draft legislation to achieve this, as well as the extension of certain filing periods for documents that have to be delivered to Companies House, is included in the Corporate Insolvency and Governance Bill published on May 20, 2020. This briefing considers both the Guidance and the draft legislation.
The Guidance has been prepared on the basis that, for most companies, postponement of the AGM is unlikely to be an option given the need, for example, to renew share allotment and other authorities and ensure directors are re-elected. As a result, it answers a number of questions companies are likely to have as follows:
A key aim of the Corporate Insolvency and Governance Bill (Bill) is to provide businesses with the flexibility and breathing space necessary to enable them to continue trading during the COVID-19 pandemic. As a result, as well as introducing measures to help companies avoid insolvency during this period of economic uncertainty, the Bill provides companies and other bodies with temporary relaxation of requirements relating to meetings, including AGMs, as well as certain company filing requirements. These are considered below.
For company meetings, whether AGMs or general meetings, held between March 26, 2020 and September 30, 2020 (referred to in the Bill as the “relevant period”):
These temporary provisions are intended to ensure that companies are able to hold AGMs and other meetings in a manner consistent with the Stay-at-Home measures. The requirements of a company’s articles of association, and any relevant provisions in legislation, will have effect subject to these temporary provisions.
The period within which a company must hold an AGM (whether as a result of legislation or a provision in the company’s articles of association) has been extended. This applies where a company was or is required to hold an AGM before the end of a period expiring during the period between March 26, 2020 and September 30, 2020. It has the effect of giving companies until the end of that period (or a later date, if extended) to hold their AGM.
The Secretary of State also has authority to make regulations to further extend, on a temporary basis, the deadline for holding an AGM but those regulations cannot be used to extend the period for holding an AGM by more than eight months.
The Bill provides for a temporary extension to the period which a public company has to file its accounts and reports with the registrar at Companies House. It applies where the filing period would end after March 25, 2020, and before the “relevant day” (defined as the earlier of September 30, 2020 and the last day of the period of 12 months immediately following the end of the relevant accounting reference period).1
The Bill enables the Secretary of State to make regulations to extend the time period which a company has to file certain documents at Companies House. Maximum time periods which may be substituted for the existing periods for those filings are specified. The deadlines that can be extended include the periods for filing accounts and confirmation statements and the time allowed to notify the registrar of certain relevant events that are covered by the confirmation statement, such as notifying the registrar of a change in director. In addition, the regulations may extend the deadline for registering a charge with Companies House.
The Guidance has been welcomed by companies planning and holding their 2020 AGM. In the absence of any legislation, it has offered pragmatic solutions to many of the issues companies have been dealing with and has provided the flexibility needed to ensure that AGMs and other company meetings have been able to go ahead in the present circumstances, leaving companies able to focus on the other critical matters that are impacting their businesses.
The draft legislation will be of interest to companies that have postponed their 2020 AGM for the moment or are yet to send out their notice of meeting. Some may decide to follow the approach taken by most companies to date, and hold their AGM as a “closed door” meeting with a minimum quorum, no shareholders present and voting conducted by proxy, since this approach is supported by the draft legislation. Others may decide to proceed on the basis of a virtual AGM in 2020, notwithstanding that they do not currently provide for such meetings in their articles of association, given this is also permitted, although careful consideration should be given to the logistics and practicalities of doing so where this is proposed.
The Corporate Insolvency and Governance Act 2020 (CIGA) of the United Kingdom received the Royal Assent on June 26 and is now in force.