AGMs: A snapshot of the FTSE 350's reaction to COVID-19 restrictions

Since our last Client Alert on Practical considerations: the impact of COVID-19 on the holding of annual general meetings, the UK Government has issued its compulsory "Stay at Home Measures" prompting ICSA to issue supplementary guidance (icsa.org.uk/assets/files/pdfs/guidance/agms-and-impact-of-COVID-19-supplement-web.pdf) regarding how listed companies incorporated under the UK Companies Act might implement contingency plans in light of such measures.

This Client Alert provides a summary of the guidance issued and how FTSE 350 companies are reacting to the "Stay at Home Measures."

Key recommendations from the supplementary guidance issued by ICSA on 27 March 2020

• Shareholders are not generally able to attend general meetings in person while the "Stay at Home Measures" are in place due to the prohibition of a public gathering of more than two people.
• Attendance at a general meeting by a shareholder is not "essential for work purposes" unless you are attending specifically to form the quorum.
• A shareholder meeting can be held "behind closed doors" with anyone whose presence is not essential being excluded, once two¹ people (including the chair of the meeting) are present.
• The wording of the AGM Notice should be unambiguous (stronger than a recommendation) in saying shareholders are not allowed to attend the meeting and should make it clear that anyone seeking to attend will be refused entry to the meeting and that shareholders should vote by proxy.
• A company can prevent shareholders and proxies from attending a general meeting. Under common law (usually reinforced in the company's articles) the chair of a meeting has broad powers to preserve the order of the meeting, ensure the safety of attendees and allow the business of the meeting to be transacted.
• Information should be offered about how shareholders can remain engaged.
• Where additional personnel are needed to ensure proper conduct and safe operation (e.g., technicians if there is a webcast or security), these should be kept to a minimum.
• Companies should make sure that the form of proxy appoints the chair of the meeting (and not the chair of the board or a specific director who may on the day be unable to attend).
• There is no legal requirement for directors (other than those whose presence may be required to form a quorate meeting as described above) to attend a general meeting and the attendance of directors would not be permitted under the Stay at Home Measures.
• If the planned venue is unavailable or otherwise inaccessible, if the company's articles allow, the board should postpone the meeting or move its location to an alternative venue.
• Companies that do not have article provisions that enable them to postpone their meeting or switch to an alternative venue should, in law, adjourn the meeting from the planned venue to an alternative venue. If practicable, it is accepted that this could be achieved by the small number of employees/others who plan to form a quorum attending the planned venue (or close to it—e.g., outside the door) and adjourning to another suitable venue.
• Social distancing measures should be observed by those attending the physical meeting.

Measures taken by main market-listed companies in relation to arrangements for their AGM since the UK Government's issue of Stay at Home Measures on 23 March 2020

Several companies have issued their notices of AGM since the Stay at Home Measures were put in place. We have set out below a snapshot of what companies are doing since such measures became effective on 23 March 2020. It is not always clear how the arrangements which companies have put in place will be operated in practice.

• Note: A significant number of companies are changing their AGM venue from their usual conference centers to their head offices. It would appear that some are changing the venue of their AGM to a residential address. Care needs to be taken in such circumstances to ensure that appropriate security measures are put in place such that this cannot be exploited by pressure groups and protestors. This risk may be small in practice in light of the general restrictions on people traveling.

• Prior to AGM notice being sent out: If prior to sending out the AGM notice the board concludes that they do not recommend a final dividend (when the market may otherwise be expecting it to), the company should not include that resolution in the AGM notice and should release an RNS explaining their rationale (as this will most likely be inside information).
• Notice already published: Where the notice has already been published and the board no longer recommends a final dividend, subject to the articles, company will need to issue an announcement via an RNS that the resolution no longer has the board's recommendation and that they intend to withdraw it. As a second step, the Chair will need to explain the position and seek the consent of the meeting not to move the resolution set out in the notice.
• Amending a resolution: If a company wants to amend a resolution (not withdraw it entirely) so that a lower dividend amount is approved, for example, then an amendment can be proposed provided that certain conditions (including as to scope and legal effectiveness) are satisfied. Any proposal to amend the resolution would need to be voted on and if approved, the amended resolution itself put to the vote (subject to the articles).
• Redundant resolution: If a resolution becomes redundant, for example, if it is unlawful for a company to pay a dividend as it has insufficient distributable reserves, the chair is not obliged to require business to be conducted at the meeting which will be wholly ineffective, so does not need to put the resolution to the meeting.
• Proxies: It is worth noting that where a proxy form includes instructions on the substantive resolutions, this may constrain how the proxy votes on related procedural or ancillary resolutions (e.g., to amend a resolution), the impact of this will need to be considered on a case-by-case basis.

• Note: We recommend that it is made clear to shareholders that there is a distinction between being able to legally participate in a meeting (e.g., vote and be counted in the quorum) and being able to listen to what is going on at the meeting (through a conference line or webex). The latter measures do not result in a shareholder legally participating in the meeting; to participate in a meeting and for a shareholder's vote to be counted, a hybrid (or virtual) meeting would have to be held. Even when there is two-way communication between the shareholder and the meeting, this does not satisfy the legal requirements for a shareholder participating in the meeting.

• Note: For many companies, the AGM is one of the main opportunities for retail shareholders and pressure groups to engage with companies. The ICSA supplementary guidance issued on 23 March 2020 makes it clear that information should be offered about how shareholders should remain engaged. It is pleasing to see that a number of companies are offering up a variety of solutions.

• Note: Most company secretarial teams field queries from shareholders on an ongoing basis. If there is no intention to allow shareholders to participate or listen in to the AGM, it may be worth reminding shareholders that this process still applies.

• Note: Investor bodies agree that using technology (e.g., webcasting the meeting) should only be used in parallel with the in-person meeting, and should not lead to companies adopting a "virtual-only" approach. Virtual only meetings are not considered to be in the best interests of all shareholders as they are viewed to be detrimental to board accountability. The Investment Association has not issued revised guidance since its December 2017 position paper on the point.²

• Note: If the market expects that an AGM will take place on a particular date each year and this has been announced (e.g., in a corporate timetable), then it is recommended that any plan to delay the AGM needs to be announced to the market as soon as possible, as it may be inside information. Different companies have different provisions in their articles and a careful review needs to be undertaken to determine what is permitted. A solution which is appropriate for one company may not be appropriate for another company.

If you would like to discuss any of the above, please speak to a member of your White & Case team or the White & Case UK Public Company Advisory team (PCA). The PCA team advises UK public companies on their day-to-day legal affairs. In particular, the team engages with listed companies outside of their transaction cycle and provides advice across a range of matters, with particular expertise in corporate governance and corporate advisory. The team is experienced in company secretarial matters and regularly provides support to non-legal functions (as well as legal and company secretarial teams) within PLCs. Our clients range in size and maturity from newly listed companies to mature companies and from small-cap companies to global FTSE 350 companies.

The PCA team is part of the network of White & Case offices offering Public Company Advisory services, with specialist practice teams in the US, Germany, Italy and France. 

_{1 This assumes a quorum of two. If, unusually, a quorum requires the physical presence of more than two persons, then additional members or proxies may be required to attend in person. This is likely to be limited to a small number of companies.
2 https://www.ivis.co.uk/media/13561/Virtual-Only-AGMs-IA-position-statement-December-2017.pdf} 

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2020 White & Case LLP