The Annual General Meeting (AGM) season is getting under way in many countries around the world for companies with December 31 year-ends.
AGMs provide one of the few opportunities shareholders have to question the board, engage directly with management, and hear the views of other shareholders.
However, the outbreak of the Coronavirus is causing companies to rethink their arrangements for 2020 AGMs in light of potential bans on large gatherings, travel restrictions and the risk that venues selected for the meetings may cease to be available due to unexpected closure.
Where AGM notices have already been sent out, or are in the process of being dispatched, companies are urging shareholders to check their websites for AGM updates, and recommending that shareholders submit their proxy votes on resolutions to be considered at the meeting as soon as possible, in case they are not able to attend the meeting in person. They are also making clear that if AGM meetings are held, they will not necessarily take place in the usual format. For example, meetings are likely to be shorter in duration as presentations by the chair and other members of the board are kept to a minimum, or replaced by webcasts.
Problems for companies are exacerbated by the fact that in a number of jurisdictions, including the UK and Hong Kong, there is a legislative requirement for public companies to hold an AGM within a specified period following their financial year-end (within six months in the case of the UK and Hong Kong). Most choose to hold their AGM well before that six-month deadline, but some may want to consider pushing the date back further where practicable. In doing so, however, they incur the risk of having to postpone again and running out of time before the statutory deadline expires.
In Singapore, where listed companies are required to hold their AGM within four months of their financial year-end, waivers have been issued by the Singapore Exchange Regulation, granting companies with December 31 year-ends a further two months (to June 30, 2020) within which to hold their AGM to approve financial results, provided certain criteria are met. It remains to be seen whether a similar approach will be taken in other jurisdictions.
Other AGM issues are considered below.
Can companies hold virtual AGMs?
Virtual AGMs held exclusively online without a corresponding physical meeting are not uncommon in the US. However, they are less common in other jurisdictions (see our briefing Will the Coronavirus spark a new era of virtual shareholder meetings in Canada? for more information on the Canadian position).
In some jurisdictions, there may be legal uncertainty as to whether holding a purely online meeting would satisfy all legislative requirements that apply to shareholder meetings. In addition, guidance from proxy advisers and institutional investors in certain jurisdictions do not support virtual-only meetings. As a result, even for those companies which have included provision in their constitutional documents permitting them to hold a virtual-only AGM, this is not a route they are likely to follow unless that guidance changes imminently.
Can a hybrid AGM be held?
In order to hold a hybrid AGM (whereby shareholders may participate electronically in the AGM in conjunction with a physical meeting), companies may need to have the necessary provisions in their constitutional documents, depending on variations in local law. Those that have such provisions, if they have not already dispatched their AGM notices, may want to consider moving to a hybrid 2020 AGM in order to reduce the number of people attending the physical location. However, this will require, among other things, engaging a technology provider, adapting the AGM documentation sent to shareholders and incurring additional associated costs.
Can the AGM be postponed or adjourned?
A company should consider whether, legally, it can postpone a shareholder meeting. In the UK, for instance, this is only possible if its constitutional documents permit this. However, in light of any requirements to hold an AGM within a fixed period after the financial year-end, as mentioned above, postponement will be a limited option if Coronavirus-related restrictions make it difficult to hold the AGM within that period.
Similar issues would arise in the case of an AGM adjournment. In common law jurisdictions, a company’s constitutional documents often provide the power to adjourn a shareholder meeting, although even without that power the chair of the meeting can adjourn in certain circumstances. However, adjournment to a later date first requires a physical meeting to be opened, with the necessary quorum requirements met, before the meeting can then be adjourned to a later date. Once again, this will be of limited value if there is a risk that the reconvened AGM could not be held within any applicable statutory window.
In the case of either postponement or adjournment, there will be implications for the resolutions to be proposed at the AGM. A number of resolutions commonly passed at AGMs, for example share allotment and disapplication authorities and buyback authorities, are drafted so as to expire at the following AGM, or at a long-stop date thereafter. If the 2020 AGM cannot be held until after the expiry of the long-stop date in the 2019 AGM resolutions, the company may not have any valid authority in these areas. By way of further example, UK companies putting a new remuneration policy to the 2020 AGM for approval will continue to be bound by their current remuneration policy until shareholder approval of the new policy can be sought.
Practical points for all companies to consider
While it is hoped that governments will legislate to extend the current statutory deadlines which apply to matters such as holding an AGM and laying accounts and reports before a general meeting, in the meantime the following are points that all companies should consider:
- Keep abreast of advice from governments, regulators, public health bodies and others – Companies planning to hold their AGM in the next few weeks need to keep abreast of advice as it changes daily and will be relevant when determining whether or not the AGM can be held, as planned.
- Communication with shareholders – When sending out the notice of meeting, shareholders should be reminded to monitor the company’s website for any changes to AGM arrangements. Companies should consider whether to announce such changes via a market announcement, as well as an update to the AGM section of the website. Companies should announce any changes as soon as possible to give shareholders time to return their proxy forms prior to the meeting, particularly given that discouraging physical attendance is likely to be appropriate. In the event that the AGM goes ahead, shareholders should be encouraged, before attending the AGM, to heed advice from governments, public health bodies and other relevant parties.
- Encourage early return of proxies – So as to ensure that shareholders are able to vote on the resolutions at the AGM, even if they do not attend in person, they should be reminded to return their proxy forms or register the appointment of their proxy electronically (where provision is made) as early as possible prior to the meeting.
- Use of poll voting at AGM – Any company that does not usually call a poll on votes at the AGM should consider doing so at the 2020 AGM to ensure that the votes of those shareholders not present at the AGM are counted on the resolutions.
- Questions from shareholders - Companies should provide the means for shareholders to raise questions prior to the meeting, either in writing or electronically, so that those not attending still have the opportunity to raise questions which can then be dealt with at the AGM, and included in a Q&A on the company’s website after the AGM.
- Consider live-streaming of meeting – If a company does not usually live-stream its AGM, it should consider the costs and logistics of doing so as a means of enabling shareholders to watch (but not participate in) the meeting.
- Consider availability of a back-up venue – As part of contingency planning, companies should consider the feasibility of organising an alternative venue for the AGM in case the original venue becomes unavailable. Any change of venue will need to be communicated to shareholders in good time.
- Consider logistics of physical meeting – If a company decides to proceed with a physical AGM so that statutory deadlines can be met, shareholder authorities renewed and other AGM business completed, the quorum provisions for attendance at the AGM’s physical venue should be checked to ensure that they can be met and the arrangements for the meeting determined. The company is likely to want to shorten presentations or to make them available only on the company website; certainly, refreshments and opportunities for shareholders to meet the board are not likely to be available in the interests of everyone’s safety. Companies should also prepare a script for their meetings in the event that adjournment is required, and plan in advance the period of their adjournment and how they would notify shareholders. In addition, companies should ensure that sanitisation and other arrangements in line with best or recommended practice in the relevant jurisdiction are in place at the AGM venue so as to ensure as far as possible the safety of those attending.
In the UK, the Institute of Chartered Secretaries and Administrators (ICSA), in conjunction with other organisations, has published guidance for companies, AGMs and impact of Covid-19, which looks at some of the issues above in more detail. In particular, it looks at the following options:
- Adapting the basis on which the company holds its AGM.
- Delaying convening the AGM if notice has not yet been issued.
- Postponing the AGM if permitted under the company’s constitutional documents.
- Adjourning the AGM.
- Conducting a hybrid AGM if permitted under the company’s constitutional documents.
The unique circumstances of COVID-19 (the Coronavirus) mean that all companies required to hold an AGM in the coming weeks and months are having to review their arrangements. Going forward, more companies are likely to consider proposing amendments to their constitutional documents to cater for hybrid meetings as a means of dealing with some of the practical problems currently arising from the need to hold a purely physical AGM, although this will not solve the problems encountered during the 2020 AGM season. It is hoped that governments and advisory bodies will provide direction to assist companies concerned about meeting statutory deadlines in order to help them make decisions about 2020 AGMs.
Please get in touch with your usual Norton Rose Fulbright contact or any of those listed if you would like to discuss any issues regarding your company’s 2020 AGM or any other shareholder meeting.