Mary Kiely: Physical distancing and the 2020 AGM – is a virtual or hybrid AGM the answer?
Mary Kiely, senior associate in the corporate and commercial team at Eversheds Sutherland, considers the challenges for companies during the coronavirus pandemic.
Given the travel restrictions and physical distancing policies currently in place and the possibility, under the Health (Preservation and Protection and other Emergency Measures in the Public Interest) Act 2020, that further restrictions might be imposed in the coming weeks and months, the board of directors of many Irish companies will need to consider whether or not the upcoming annual general meeting (AGM) should be rescheduled.
Certain Irish companies, such as single-member companies and private companies limited by shares (LTD) may dispense with the legal requirement to hold an AGM by opting to carry out the business of the AGM by way of a unanimous written resolution. However, certain other companies, such as public limited companies, cannot dispense with their AGM in the same way.
Since the COVID-19 outbreak, we have seen a number of Irish companies take different approaches in relation to upcoming AGMs. The board of directors of Permanent TSB Group Holdings plc made the decision to defer the convening of the company’s 2020 AGM while other Irish listed companies have opted to proceed with their upcoming AGM.
Under Irish law, an AGM generally cannot be held more than:
- 15 months from the date of the last AGM held by the company; and
- 9 months from the date of the financial year end of the company.
In the case of a newly incorporated company, the first AGM must be held within 18 months from the date of the company’s incorporation.
It is also important to bear in mind that certain resolutions passed at the last AGM of the company, such as share issuance authorities and share buy-back authorities, may be subject to an expiration date.
Given the legal requirements to hold AGMs combined with the uncertainty around how long the COVID-19 restrictions will remain in place, certain Irish companies will be precluded from postponing their 2020 AGM until after the current COVID-19 restrictions have been lifted.
In such circumstances, is a virtual or hybrid AGM the answer?
Unlike company law in England and Wales, the Companies Act 2014 does not specifically provide for “virtual only” AGMs. However, subject to the constitution of the company, a “hybrid” AGM is permitted under Irish law.
Unlike a virtual only AGM which prescribes that all members of a company entitled to attend and vote at the AGM attend and vote via electronic means, a hybrid AGM will have a certain number of eligible members physically attend and vote at the AGM and the remainder of the eligible members will attend and vote via electronic means. Given the COVID-19 restrictions currently in place, a hybrid AGM will be a useful solution for many companies.
For those companies whose constitution does not specifically provide for electronic participation at AGMs, all is not lost. Such companies could proceed with their “physical” meeting and, provided a quorum is present at the meeting, enable eligible shareholders to follow the meeting by way of live stream, videoconference and/or telephone. While this approach would not enable such shareholders to vote in the AGM (unless a completed form of proxy was validly submitted ahead of the meeting), it would allow shareholders to informally participate in the AGM.
In addition to complying with the company’s constitution and the usual company law requirements for an AGM, the following should also be considered if convening a hybrid AGM or an AGM which is available via live stream, videoconference and/or telephone in the coming weeks:
Physical attendance at the AGM: In the notice of AGM, having regard to the quorum for the AGM, the company should encourage its members to participate and vote electronically in the case of a hybrid AGM or, if electronic participation is not permitted, to appoint a proxy (such as the chair of the meeting) to attend and vote at the AGM on the member’s behalf. As a further precaution, it is also advised that a power of substitution be included in the form of proxy.
The number of directors and non-shareholder attendees physically present at the meeting should also be restricted. Where possible, the presentations usually made by certain members of the board and company executives should be pre-recorded and/or the transcript of such presentations made available to the shareholders on the company’s website. In the case of the transcript, it could also be posted to shareholders.
Shareholder identification and voting procedures: In respect of hybrid meetings, it is important that the chair of the meeting is able to identify and hear the shareholders present. Companies are advised to put in place (if not already in place) shareholder identification and voting procedures. Such policies should be shared with shareholders in the notice of AGM and on the company’s website.
Live-streaming/dial-in details: If a hybrid AGM is not permitted, where possible, a live-stream of the AGM could be made available to each eligible shareholder and/or each eligible shareholder could be allowed to “dial-in” to the AGM via videoconference and/or by telephone. The details of the live stream and/or the dial-in details could be made available to the shareholders in the notice of AGM and on the company’s website.
Recording/minutes of the meeting: Where possible, the AGM could be recorded and following the meeting, such recording made available to the shareholders on the company’s website. The minutes of the meeting and/or a transcript of the meeting could also be made available to the shareholders on the company’s website and/or by posting such information to the shareholders.
Shareholder questions: The company should provide a facility to shareholders, such as an online portal on the company’s website, a specific email address and/or postal address, to submit questions relating to the business of the AGM in advance of the meeting. The company should provide details of this facility to the shareholders in the notice of AGM and on the company’s website. Where possible, written or pre-recorded answers to the shareholder questions could be provided to the shareholders prior to the meeting (this would reduce the time required for the “physical” AGM). If this is not possible, directors could prepare their responses in advance of the meeting and share the responses with the shareholders at the AGM.
Health & safety: In relation to the “physical” AGM, the company should ensure the up-to-date relevant COVID-19 guidance is adhered to when convening the meeting. The meeting should also be convened with a minimum quorum and conducted as quickly and efficiently as possible.
This area of law is very technical and for certain companies, hybrid meetings may not be feasible from a time and/or cost perspective.
- Mary Kiely is a senior associate in the corporate and commercial team at Eversheds Sutherland.