Ogier is receiving an increasing number of queries from companies and investors on how best to manage the upcoming AGM season in light of the developing COVID-19 pandemic.
The legal requirement
COVID-19 is putting pressure on Boards to make decisions quickly about upcoming AGMs with the health and safety of all stakeholders attending being the paramount consideration and to communicate with their investors about how best to proceed in such uncertain times.
Public companies incorporated in Jersey have a legal obligation to hold an AGM in each calendar year with not more than 18 months elapsing between the date of one AGM and the next.
Therefore there is a legal obligation on the Board to act, but what is the best way forward and what options do the Board have when dealing with such a difficult situation?
Hybrid-AGMs are an obvious solution to combatting social gatherings in the wake of COVID-19 and the restrictions which are being placed on physical meetings but such provisions must be expressly permitted by a company's articles of association.
The hybrid-AGM is an extension of the conventional meeting. The concept was really introduced to add flexibility and to take advantage of technology to encourage shareholder participation whilst still allowing for a physical meeting to take place somewhere in the world where shareholders could attend if they wished.
Companies that can convene a hybrid-AGM should do so and encourage all shareholders to utilise the technology available to allow them to attend the meeting rather than attending in person.
For those without the option to embrace technology, shareholders should be encouraged to submit a conventional proxy form to allow the shareholders to be represented at the meeting and to vote and count in the quorum.
Remember, whether promoting the use of technology or the proxy form, all shareholders still have the right to attend the AGM in person if they so wish (subject obviously to travel and gathering restrictions that are likely to curtail this ability at the present time).
A word of caution for those considering proceeding without adherence to the constitutional requirements of a company. Non-compliance does pose a risk for the Board which could void the business of the AGM or at least leave it open to challenge so proceed with caution. If possible, Boards may wish to consider proposing resolutions at upcoming AGMs to specifically allow hybrid shareholder meetings to take place so that this flexibility is in place, and beyond doubt, for future meetings.
Do not assume you can automatically postpone or adjourn your AGM - not least where such postponement would exceed the statutory time limit for convening such meeting.
If you can adjourn or postpone the AGM to a later date and remain within statutory limits, the Board should consider whether this could be kicking the can down the road to a time when the same problem may remain.
The Board may still be faced with making difficult decisions and attempting to hold the AGM (provided a quorum is present) especially if many shareholder votes have been submitted by proxy could well be the best option.
If a physical venue for the meeting is simply not available due to closure this will need to be dealt with and considered on a case by case basis. To assist, we recommend following the guidance recently issued by The Chartered Governance Institute and separately by the United Kingdom's Financial Conduct Authority which provides guidance on how best to adapt corporate governance measures in such difficult times. Although the guidance is not directly applicable to Jersey companies, it provides, in our view, the best current corporate governance practice available.
Very much in the spirit of the guidance, we suggest directors facing a decision to change a venue post circulation of the AGM notice should consider urgently issuing a supplemental notice detailing a change of venue. Any such notice should encourage use of proxies or use of technology to attend the AGM "virtually" (where permissible in the articles of association).
Proceeding in difficult times
7 top tips if you must proceed with your AGM:
- Communicate with shareholders as early in the process as possible regarding changes to plans/format
- Encourage shareholders to vote by proxy (a vast majority of public companies will already have some form of electronic proxy facility) - check whether or not shareholder can be "present" by proxy and whether they can count in the quorum
- Embrace technology - but only where the articles of association permit – and encourage shareholder participation using hybrid-AGM provisions
- Streamline the agenda to deal with statutory business only
- No advisers or senior executives present in person (they can be available via electronic means)
- No presentations which are not part of the core statutory business
- No refreshments
We appreciate how difficult the present situation is for everyone and are available to give pragmatic advice and support on how to navigate the unusual shareholder meeting issues which are likely to arise.
Further information, contact the Corporate team at Ogier here.
"Guidance on AGMs and impact of COVID-19" has also been produced jointly by Slaughter and May and The Chartered Governance Institute, with the support of the Financial Reporting Council, GC100, the Investment Association and the Quoted Companies Alliance. The Department for Business, Energy and Industrial Strategy has also reviewed the guidance.
A copy of the Guidance can be accessed here.