Holding meetings throughout the COVID-19 pandemic, where the company’s articles of association do not allow them to be held virtually, is an issue faced by many companies at the moment. We explain how the amendments to the Corporate Insolvency and Governance Act 2020 can help businesses keep their shareholders and members safe now and into 2021.
Which governance requirements are affected?
Under the Companies Act 2006, an Annual General Meeting (AGM) must be held by every public company within six months of their financial year end and by private, traded companies within nine months of their financial year end.
During the COVID-19 outbreak, companies have struggled to meet these requirements due to the Government-imposed restrictions on public gatherings through social distancing legislation and guidelines.
Even if an organisation is not required under UK legislation to hold an AGM, it will likely have still wished to convene accounts, shareholder or member meetings to maintain an open dialogue during this unprecedented time and ensure that key business decisions can be made.
What does the Government guidance mean in practice?
In late June, the government issued a bill to relax some of the requirements around holding AGMs and general meetings to make it easier for organisations to navigate through the COVID-19 outbreak from a governance point of view.
The bill includes measures to temporarily suspend shareholders’ and members’ requirements to attend meetings in person and instead allow companies to convene meetings virtually using technology. Meetings can be convened from several separate locations, with a limited number of participants dialling-in to the meetings from each.
It also brings flexibility to organisations’ governance timetable, allowing AGMs to be postponed until before the end of September 2020.
The bill emphasises that the safety and wellbeing of the organisations’ shareholders and members is paramount, and ensures that their rights to express their views at meetings are maintained by allowing voting by electronic and other means.
These changes overrule any contrary provisions in legislation and the constitution of the relevant organisation.
How long can organisations make use of these measures?
Initially the measures are in place until 30 September 2020, but organisations can seek to extend their application until 5 April 2021 in periods of three-months.
As mentioned above, AGMs that were due to be held between 1 March 2020 until 30 September 2020 can be delayed until 30 September 2020 at the latest. Other general meetings that should have been held between 1 March 2020 until 30 September 2020 can be delayed by up to a further eight months.
Who do these measures apply to?
Companies, “mutuals” such as building societies and friendly societies, and Charitable Incorporated Organisations can make use of the measures.
We hope you’ve found this commentary helpful. Kelly Jordan, partner in our restructuring and insolvency team, has put together 5 other bitesize updates on the Corporate Insolvency and Governance Act 2020, which can be accessed here.
For more help and specialist governance advice, contact Sophie Robertson on 0191 211 7811 or email [email protected].