BEIS: Measures in respect of company filings, AGMs and other general meetings during COVID-19 – Best practice guidance for AGMs
In April and May 2020, the Department for Business, Energy and industrial Strategy (BEIS) published a series of Q&A to help companies plan matters such as their AGM in light of the COVID-19 restrictions which made it difficult to meet certain statutory obligations. Companies were urged to consider the best feasible way of fulfilling obligations to engage with shareholders where previous practices could put the safety and wellbeing of shareholders at risk. In the May Q&A, BEIS announced that it would publish guidance on what it considers best practice in this regard and this updated BEIS Q&A, published on June 8, 2020, sets out that best practice guidance in Appendix A.
The best practice guidance notes that the proposed Corporate Insolvency and Governance Bill 2020 includes temporary relaxations to enable AGMs to be held but it points out that AGMs are an important opportunity for shareholder engagement and voting. As a result, it suggests companies should monitor and review their position and decide what approach best balances members’ safety and their legitimate expectation to be able to engage with the board.
If it is not felt possible to hold a physical meeting all shareholders can attend, the guidance suggests that one option could be a physical meeting with a representative cross-section of shareholders, with all shareholders being able to ask questions before voting takes place. Another option, where it is felt a physical meeting would not be safe, could be to hold a virtual meeting. However, recognising challenges in ensuring the availability of technology to support member attendance as part of the meeting quorum, the guidance suggests transmission of the AGM proceedings in real time over the website as another possibility, with shareholders being given the opportunity to ask questions before the AGM. It suggests that where possible, answers should be provided before voting takes place or proxy voting closes.
Where shareholder engagement in the AGM is limited, companies are urged to consider how they could provide shareholder events later in the year, either online or physically.
The guidance sets out some “Best Practice Essentials”, with exemplary member communication being seen as the key element of good practice. It is stated that this should include:
- Issuing communications in a timely fashion to ensure members can consider the matters to be voted on.
- Ensuring that clarity is given on proxy voting.
- Explaining the procedure for both the meeting and any communications prior to the meeting.
- Giving all members the opportunity to both ask questions and receive responses to those questions prior to voting either at a real time on-line meeting or via proxy.
- Making answers to any questions raised available to all, both in the meeting and in written form following the meeting. This could be in real-time in the case of virtual meetings; and
- Offering a physical meeting to all shareholders once Government restrictions are lifted.
BEIS notes that over the longer term, companies and other bodies and their members may benefit from a move to a hybrid AGM format that enables attendance both in person and online. With this in mind, the Financial Reporting Council (FRC) plans to work alongside representatives of both companies and shareholders to produce a fully considered assessment of best practice later in 2020. While this assessment will focus on companies and shareholders, it is envisaged it will be of relevance to other sectors.
(BEIS, Measures in respect of company filings, AGMs and other general meetings during COVID-19 – Best practice guidance for AGMs, 08.06.2020)
LSE: Inside AIM: Coronavirus – Temporary measures for publication of half-yearly reports
On June 9, 2020, the London Stock Exchange published an issue of Inside AIM setting out temporary changes relating to an AIM company’s obligation to notify half-yearly reports in accordance with the AIM Rules for Companies.
An issue of Inside AIM published on March 26, 2020, set out AIM Regulation’s intention to keep under review the requirements for reporting of half-yearly reports pursuant to AIM Rule 18. Currently under the AIM Rules, an AIM company must notify its half-yearly report without delay and in any event within three months from the end of the period to which it relates.
From June 9, 2020, AIM Regulation will permit AIM companies that need extra time to prepare their half-yearly report an additional one month in which to notify them. This extension is temporary and AIM Regulation will keep these temporary measures under review. When the disruption to AIM companies eases, AIM Regulation will announce an orderly transition to standard reporting periods under AIM Rules 18 and 19.
An AIM company wishing to utilise the additional one-month period must notify via an RIS its intention to do so prior to the AIM company’s reporting deadline under AIM Rule 18 and the company’s nominated adviser must separately inform AIM Regulation.
(LSE, Inside AIM - Coronavirus – Temporary measures for publication of half-yearly reports, 09.06.2020)
FCA: Primary Market Bulletin No.29 – Best practice note on identifying, controlling and disclosing inside information for industry regulators and others
On June 9, 2020, the Financial Conduct Authority (FCA) published their latest Primary Market Bulletin (PMB) which includes a best practice note on identifying, controlling and disclosing inside information. The note is aimed at government departments, industry regulators and public bodies. It follows a consultation on the draft note included in PMB No. 25 and discusses the feedback the FCA received and the changes made in response. The final note is included in PMB No. 29.
The note points out that because of the work government departments, industry regulators and public bodies do, their organisation may hold information that is confidential, non-public and valuable. If it was disclosed to the public, it could affect the market prices of shares and other financial instruments. If handled incorrectly, it could lead to disorderly markets. This would damage the integrity of the UK market, as well as creating the potential for market abuse, such as insider dealing. As a result, organisations need to satisfy themselves that they comply with the relevant provisions of the Market Abuse Regulation (MAR) and take steps to identify, secure and govern how they handle and disclose inside information.
The note sets out suggested approaches to systems and controls for handling inside information to help organisations, and sets out questions to ask to assist in identifying inside information. It states that examples of inside information could include:
- Proposals to amend the terms of an industry agreement, contract, license or exemption.
- Policy changes and consultations or conclusions of any sectoral reviews which could affect one or more companies or a sector.
- Information received as part of the organisation’s regulatory functions.
The note suggests a number of internal protocols to classify and handle information and provides guidance on disclosing inside information. It includes recommendations for systems and controls that will help organisations disclose inside information correctly – whether disclosing to selected parties or publicly. It also discusses dealing with leaks and recommends having contingency plans for handling cases where inside information leaks before the planned announcement date. It recommends that if there is a leak, the inside information should be released to the market as soon as possible using an appropriate method, even if this requires an announcement during market hours.
(FCA: Primary Market Bulletin No.29 – Best practice note on identifying, controlling and disclosing inside information, 09.06.2020)
ICAEW: Guidance for preparers of prospective financial information – TECH 04/20CFF
On June 4, 2020, the ICAEW issued a new technical release, TECH 04/20CFF, which is a preparation framework for a high standard of financial forecasts or projections. It is aimed at helping the preparation of prospective financial information (PFI) for which there is a prescribed form, for example, in the UK, in connection with regulated capital markets transactions, and in situations where there are no regulatory requirements, for example, in connection with the private raising of debt or equity, or in connection with the private sale of a business.
- Defines PFI and introduces and explains the preparation principles.
- Includes illustrative general guidance that codifies best practice in the preparation process.
- Explains regulatory requirements for PFI prepared in connection with regulated capital markets transactions.
- Provides specific application guidance for PFI where there is a prescribed form, for example in relation to statements of sufficiency of working capital, profit forecasts and cost-saving statements in connection with regulated capital markets transactions.
TECH 04/20CFF replaces the ICAEW’s guidance “Prospective Financial Information: Guidance for UK Directors” which was published in 2003. That will be withdrawn on October 15, 2020 when TECH 04/20CFF becomes effective. TECH 04/20CFF was originally due to be published in March 2020 to be effective from June 30, 2020, but was postponed to avoid distracting businesses from navigating the COVID-19 crisis and its impact.
(ICAEW: Guidance for preparers of prospective financial information – TECH 04/20CFF, 04.06.2020)