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The Corporate Insolvency and Governance Act 2020 (Act) came into force on 26 June 2020.
Whilst the Act introduces a number of insolvency measures to seek to provide companies with the flexibility and breathing space they need to continue trading during the COVID-19 pandemic, this article is focused on the provisions introduced in the Act relating to the holding of shareholder meetings amid the social distancing policies in place to control the pandemic.
Schedule 14 sets out the provisions relating to meetings of companies and these provisions apply to “qualifying bodies” which includes all types of companies including public companies, private companies limited by shares or guarantee and private unlimited companies. The Act applies to all “qualifying meetings” which includes general meetings (including annual general meetings) of qualifying bodies, meetings of any class of members of a qualifying body and meetings of delegates appointed by members of a qualifying body.
The Act applies retrospectively from 26 March 2020 and the measures remain in place until at least 30 September 2020 (Relevant Period). The end date of 30 September 2020 may be extended by the Government if it is considered that the flexibilities provided by the Act are still required beyond that date. The retrospective nature of the Act means that if a company has held a general meeting since 26 March 2020 that did not comply with obligations it its constitution or in the Companies Act 2006 due to changes necessary to comply with social distancing policies, then it will be deemed to have conducted that meeting legally.
In summary the Act provides that, notwithstanding anything contrary in the articles of the company in question or in the Companies Act 2006, a meeting held during the Relevant Period need not be held in a particular place, may be held and any votes cast by electronic or other means, may be held without any number of those participating in the meeting being together in the same place and removes the rights of members to attend the meeting in person, participate in a meeting other than by voting or to vote by particular means. In addition, any requirement to hold an AGM within the period outlined above will immediately be extended to 30 September.
This means that a meeting could be held fully or partially virtually, without any requirement that they are physically together in the same location. A quorum may be met by attendance via electronic means. Shareholders with a right to a vote retain those voting rights in respect of any resolutions put to the meeting but they do not have a right to vote by any particular means.
The Act doesn’t stipulate what method of communication be used for virtual meetings so companies are free to choose i.e. video conference or conference call. Proxies could still be permitted in advance in accordance with the provisions of the company’s articles.
If there are going to be technological issues with holding a virtual meeting with a large quorum required to take decisions shareholders could appoint proxies rather than attend the meeting via electronic means, provided that relevant provisions in the articles are followed.
The Act does not mean that other elements of calling a shareholder meeting are disregarded. For example, a notice of general meeting must be provided in the usual way in compliance with the articles (save that under the Act there is no need to state that the meeting is held in a particular place) and the notice should be unambiguous and clear about how the meeting will be held, how voting will be captured, and the use of proxy voting. A quorum will still be required before decisions can be made.
Companies are also required to continue to communicate with shareholders in accordance with statutory requirements and their constitutional documents.
The changes introduced by the Act will be of specific help to those companies whose constitution provides that the company has to hold a general meeting within a specific timeframe, or to make a specific decision, as in those instances, the company cannot elect to use the written resolution procedure set out in Chapter 2 of Part 13 of the Companies Act 2006.
The changes introduced by the Act are temporary and are intended to assist companies during this period of uncertainty. Looking beyond the 30 September 2020, which is the current end date for these temporary measures, companies may wish to consider whether their governing documents might benefit from amendments to allow for the ability to hold meetings more flexibility in the future.
Should you wish to discuss the implications of the Act or whether your governing documents might benefit from amendment, please do not hesitate to contact a member of the Corporate & Commercial team at Cleaver Fulton Rankin.