The Financial Reporting Council (FRC) has published guidance on best practice for annual general meetings (AGMs) in light of the temporary measures the government has introduced to assist companies in managing the impacts of the coronavirus pandemic
The Corporate Insolvency and Governance Bill 2020 currently going through Parliament contains a range of measures including temporary easements to make it easier for companies, mutual societies and charitable incorporated organisations to reconcile, on the one hand, obligations to hold AGMs and, on the other, the restrictions on movement and public gatherings imposed by coronavirus regulations, and the government’s social distancing guidance.
The bill provides temporary flexibility by suspending certain statutory and constitutional requirements and allowing relevant bodies to determine who is and who is not permitted to attend a meeting, that a meeting can be convened with a quorum formed by members situated in different locations, and that the quorum for the meeting can be formed by members communicating by electronic media including by telephone.
The measures will be temporary, applying retrospectively from 26 March and ending on 30 September.
The start date mirrors the dates that legislation restricting gatherings came into effect, and therefore meetings which have already been held by companies and other bodies from that date onwards will be considered as operating under the flexibilities in the Bill.
The FRC says it does not anticipate that all organisations will necessarily want, or have to exercise the temporary flexibilities to their full extent.
The regulator points out the nature of restrictions and the content of government guidance might change over the period to the end of September, so companies should first of all monitor and review their position and take a view on what approach best balances the safety of members and their legitimate expectation to be afforded engagement with the board.
Where the outcome of that consideration is that a ‘business as usual’ meeting - with all members entitled to attend - is not tenable, organisations should consider whether there might nonetheless still be scope to convene a physical meeting with a representative cross-section of members. If such a meeting were to be possible it is important to ensure that all shareholders can ask questions before any voting takes place.
Where the physical exclusion of members appears the only safe option, organisations should explore how they might actively participate in a meeting by virtual means. It is possible that there may be some challenges in ensuring the availability of technology to support member attendance virtually as part of the meeting quorum.
Where that is not viable, organisations might look to transmit the proceedings of their AGM in real time over their website and give viewing members the opportunity to raise questions prior to the meeting.
Wherever possible, answers should be provided before voting takes place, or proxy voting closes.
In addition, where member engagement in the AGM has been limited, organisations should give full consideration to the range of ways they might accommodate members through events later in the year, either online or - when government guidance permits - physically.
The FRC says that as a minimum, organisations should consider exemplary member communication as the key element of good practice.
This should include issuing communications 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 on-line meeting or via proxy; and making answers to any questions raised available to all both in the meeting and in written form following the meeting.
Looking ahead, the FRC said the lessons learned as a result of the challenges of the 2020 AGM season may signal a shift to a hybrid AGM format that enables attendance both in person and on-line.
With this in mind, the FRC plans to work alongside representatives of both companies and shareholders to produce a fully considered assessment of best practice later this year.