Covid-19 Corporate Update: CIGA 2020 and Virtual AGMs
2nd October 2020
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 came into force on 29 September 2020.
The Regulations prolong the “Relevant Period” as provided by Schedule 14 of the Corporate Insolvency and Governance Act 2020 (“CIGA 2020”), within which certain temporary provisions in CIGA 2020 relating to company meetings shall have effect.
These temporary provisions include allowing (but not requiring) companies to hold fully or partially virtual annual general meetings (AGMs), with attendance and voting occurring electronically. This flexibility was originally afforded to companies and other corporate bodies for the period of 26 March until 30 September 2020. Under the new regulations, Regulation 2(4) provides that the definition of “Relevant Period” has now been amended, such that it will end instead on 30 December 2020 (N.B. not 31 December 2020).
During the Relevant Period, AGMs:
• need not be held in any particular place;
• may be held, and any votes permitted to be cast, by electronic or any other means; and
• may be held without any number of those participating in the meeting being together at the same place.
This means that during the current period of restrictions where the number of people who can lawfully gather together is limited, companies may hold virtual AGMs and avoid the need for all members to be physically present.
The Regulations provide that the members of the company (or other corporate body) will not have the right to attend the AGM in person, participate in the AGM other than by voting or vote by particular means. However, members will retain existing rights to vote even if they are required to exercise those rights by voting other than in person, for example electronically or by proxy. Companies are expected to consider these rights and make reasonable efforts to provide the usual degree of engagement and challenge to a virtual AGM as would be expected of one attended physically.
BEIS and FRC Guidance for AGMs
The Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) have published some best practice guidance (Updated-QA-AGMs-Best-Practice-Final (2).pdf) for companies holding virtual AGMs. It is advised that, as a minimum, companies should consider exemplary communication with their members as the key element of good practice. This should include:
• issuing communication 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 online meeting or via proxy;
• making answers to any questions raised available to all, both in the meeting and in written form following the meeting (answers could be provided in real-time in the case of virtual meetings); and
• offering a physical meeting to all shareholders once government restrictions have been lifted.
It is worth noting that the Relevant Period may be shortened, or extended further in case of a future lockdown, but cannot be extended beyond 5 April 2021 without a further Act of Parliament.
In the longer term, companies and other corporate bodies are being advised to review their articles to determine whether additional flexibility is necessary.
Please remember that we at WJM are here to help during this exceptionally difficult time, please don't hesitate to get in touch if there is anything you think we can help with.
For any advice in relation to any particular aspects of the above, please contact a member of the Wright, Johnston & Mackenzie Corporate Team.
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at October 2020. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.