Coronavirus: Implications for meetings of directors and shareholders

Given the current circumstances on social distancing and self-isolation, companies planning board or shareholder meetings may need to consider alternative arrangements other than face to face meetings.

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Coronavirus: Implications for meetings of directors and shareholders

Given the current circumstances surrounding the Covid-19 virus and the government guidance on social distancing and self-isolation, companies planning board or shareholder meetings may need to consider alternative arrangements other than face to face meetings.

Board Meetings

Whilst board meetings are commonly held on an informal basis, if significant decisions need to be made in respect of the business, a more formal meeting between all of the directors may be required.

It is now widely accepted that directors’ meetings may be conducted by telephone or other electronic means, and the articles of association of most companies incorporated after the introduction of the Companies Act 2006 explicitly permit this. Companies with older articles of association may not have specific provision for telephone or electronic meetings but recent decisions of the Courts have lowered the risk that a board meeting held in this manner would be considered invalid for these companies.

If a board meeting is held by telephone (or other electronic means), we would recommend that the following steps are taken:

1. all directors give their express consent to the meeting being held in such a manner in advance of the meeting;

2. the meeting is held in such a way that every director can hear all the other directors; and

3. minutes of the meeting are circulated to each director present for their approval to reduce the likelihood of later disputes over the business carried out at the meeting.

Shareholder Meetings

Most matters requiring approval of shareholders in private companies can be dealt with by way of written resolution, which reduces the need for physical meetings. However, companies planning an AGM or General Meeting may need to consider contingency plans to ensure that these meetings can be held safety and in line with the changing government guidance. Many companies will undoubtedly consider a delay to such meetings (if notice has not yet been issued) or postponing the meeting (if permitted under the articles). However, if a shareholder meeting cannot be delayed, companies may wish to consider virtual/electronic meetings or hybrid meetings (i.e. there is both a physical place for the meeting and electronic access).

The Companies Act 2006 permits electronic meetings provided those persons who are not present together at the same place may be electronic means attend, speak and vote at the meeting. However, it is important that companies ensure that there is no explicit or implied prohibition on meetings being held electronically contained in the articles of association of the company. It would be best practice to amend the articles to specifically provide for holding meetings electronically, if possible.

There is still some uncertainty in respect of the legality of entirely virtual AGM’s held by public listed companies, despite the first such meeting being held by Jimmy Choo PLC in 2016. Recent government guidance suggests that public companies may wish to consider holding a hybrid AGM rather than a purely electronic meeting.

In addition to recommending the use of hybrid meetings where possible, the guidance suggests:

1. using multiple venues linked by electronic means to limit the number of people in each location (if permitted by the articles);

2. encouraging the use of proxy voting (although care should be taken to ensure that the physical meeting satisfies quorum requirements);

3. ensuring the venue for the meeting is suitable and consider additional steps to promote health and safety (such as hand sanitising, social distancing, temperature checks, not providing refreshments etc.); and

4. ensuring the technology available is sufficient to enable participants to both speak and vote at the meeting.

The unique circumstances of Covid-19 mean that all companies required to hold shareholder meetings in the coming weeks are having to review their arrangements and it is hoped that the government will legislate to extend current statutory deadlines which apply to matters such as holding an AGM. In the meantime, we would recommend keeping abreast of advice of government, regulators and public health bodies and to consider any of the steps set out above which help to deal with the practical problems currently arising from the need to hold purely physical meetings.

If you wish to discuss any of the issues set out above, or would like assistance to ensure that meetings are held validly, please contact Henry Hill at henry.hill@keebles.com or on 07708 901343.

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