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The coronavirus (COVID-19) crisis, and the consequential restrictions on public gatherings, have had a significant impact on the 2020 annual general meeting (AGM) season. This analysis considers that impact on a sample of 95 FTSE 350 and AIM 50 companies issuing an AGM notice between 27 March and 15 April 2020.
On 17 March 2020 the Chartered Governance Institute (CGI) issued guidance (CGI Guidance) for companies planning their AGM in light of the coronavirus (COVID-19) crisis, produced in conjunction with Slaughter and May and supported by the Financial Reporting Council (FRC), GC100, the Investment Association (IA) and the Quoted Companies Alliance (QCA).
On 26 March 2020, compulsory measures (the 'Stay at Home Measures') prohibiting, among other things, public gatherings of more than two people were passed into law in England and Wales, with immediate effect, in statutory instruments (SI 2020/350 in England and SI 2020/353 in Wales) made pursuant to the Public Health (Control of Disease) Act 1984.
As a result of these measures the CGI published supplementary guidance (Supplement) specifically aimed at companies who do not wish or are not able to postpone their meetings. This Supplement provides guidance as to how listed companies might implement contingency plans in light of the Stay at Home Measures in the absence of any relevant legislative changes.
On 28 March 2020 the Business Secretary announced that the government will introduce legislation to ensure those companies required by law to hold AGMs will be able to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus. Companies will temporarily be extended greater flexibilities, including holding AGMs online or postponing the meetings. This measure followed an announcement that companies would automatically and immediately be granted a three-month extension to the filing of their accounts following a fast-track online process. See also the further announcement from the BEIS and FRC on 17 April 2020 regarding measures in respect of company filings, AGMs and other general meetings.
For further information on the evolving legislative and regulatory environment in relation to the holding of AGMs see Practice Note: Coronavirus (COVID-19)—holding general meetings and AGMs and see our Coronavirus (COVID-19)—AGM tracker for details of how FTSE 350 and AIM 50 companies are responding to the crisis and associated regulatory guidance, including links to the relevant Notices of AGM, revised notices, announcements and company websites.
The following analysis captures data from 95 AGM notices issued by FTSE 350 and AIM 50 companies between 27 March 2020 and 15 April 2020.
In our study we investigated whether companies were postponing, delaying or adjourning the date of their AGM.
The vast majority of companies (92%) have not changed the date for their AGM (although some of these may not have previously decided a specific date by the time the crisis accelerated). However our analysis indicated examples of companies postponing and adjourning their meeting depending on circumstances specific to each company, eg:
Glencore plc has announced that it is postponing its meeting from a previously announced date of 6 May 2020 to a new date that will be indicated by 31 May 2020
FDM Group (Holdings) plc has announced that it is postponing its AGM from 29 April 2020 to a date (as yet unspecified) to be no later than 30 June 2020, and
Johnson Service Group plc, one of the few companies to have adjourned its AGM, has adjourned the meeting to a new location at a different time on the same date
The majority of companies (75%) are only allowing restricted attendance at their AGMs, with physical attendance by only specific individuals (usually senior officers or employees of the company) to ensure that the AGM is quorate. Others have opted more specifically for a hybrid or virtual form which allows a more formal electronic mode of participation.
Sanne Group plc is among the few companies that have not explicitly restricted attendance for its AGM. However, the company has announced that it expects the movement restrictions to be lifted by the planned time of its AGM and that in the event that the compulsory measures are not lifted, the company will look to postpone the meeting.
Companies have so far been relatively slow to embrace holding hybrid or virtual-only AGMs, with the latter encompassing just 2% of the data set. While wholly virtual meetings have generally been unpopular with regulators and institutional investor organisations, it is clear that the emergency measures being considered in the wake of the coronavirus pandemic mean that much greater flexibility is required to allow companies, albeit temporarily, to achieve the AGM approvals that they may need. It should be noted however that the CGI Guidance or Supplement does not specifically promote virtual-only AGMs, instead emphasising that companies must operate within the law and within the bounds of their own constitutions (see Electronic, virtual or hybrid general meetings (including AGMs)).
Additionally, some companies are yet to announce the form in which their AGM will take place.
A majority of companies (80%) in the data set have not announced amendments to their articles of association, with a few companies yet to announce their arrangements (9%) and a limited number of companies proposing amendments. So far, only FTSE 350 companies have proposed amendments to their articles, with the majority of those being FTSE 100 companies.
Of the companies that have proposed amendments to their articles, the most commonly proposed amendment has been to allow the company to hold hybrid meetings. The companies that have made these proposed amendments are:
William Hill plc
Vistry Group plc, and
Polypipe Group plc
All of the previously mentioned companies except Vistry Group plc have explicitly clarified that the amendments will not allow the company to hold general meetings on an exclusively electronic basis.
In its notice dated 3 April 2020, Standard Life Aberdeen plc proposed a resolution to allow the shareholders to join general meetings remotely via electronic facilities but noted that the company does not currently intend for general meetings to be conducted via electronic facilities.
Rio Tinto plc also proposed changes to its articles to allow meetings to be held physically and/or electronically. Additionally, InterContinental Hotels Group plc has proposed a resolution to allow shareholders to attend and participate in shareholder meetings by electronic means.
In an updated AGM notice dated 6 April 2020, Flutter Entertainment plc proposed a resolution at an EGM on 21 April 2020 to amend its articles to reduce the quorum for general meetings (including the AGM on 14 May 2020) from ten to two people (see page 3 of the notice). InterContinental Hotels Group plc has also proposed a resolution to reduce its quorum from three to two members.
Segro plc, Intercontinental Hotels Group plc and St. James’s Place plc have proposed resolutions relating to the postponement or adjournment of general meetings. For Segro plc, the proposed resolution allows the company to amend the business of an adjourned meeting provided adequate notice is sent to its shareholders and only requires notice to be sent where an adjourned meeting is to take place more than three months after the initial meeting. Intercontinental Hotels Group plc proposed a resolution to allow the company to postpone general meetings where it is impracticable or unreasonable for the company to hold a general meeting. St James’s Place plc has proposed a resolution to permit the directors to move, postpone or adjourn meetings at short notice, including the chair’s power to adjourn a meeting.
Intercontinental Hotels Group plc and St James’s Place plc have also proposed resolutions to allow the board to make necessary arrangements to ensure the safety of those attending general meetings.
The articles of St James’s Place plc already allowed for the company to hold hybrid general meetings but further proposals were made to clarify procedural matters in light of the coronavirus crisis. The proposed new articles clarify the basis upon which electronic attendance via hybrid meetings can be proposed and established, and permit the directors to make arrangements for attendees to view and hear proceedings without attendees at these venues being formally present or entitled to vote at the meeting.
All companies in the data set made changes to the way their AGM should be conducted.
Participation and voting
As expected from the supplementary guidance from the CGI following the implementation of the Stay at Home Measures, a large proportion of companies have encouraged their shareholders to vote by proxy. Given the rapid developments in the legislative and regulatory backdrop, companies have encouraged their shareholders to monitor their websites for amendments to AGM arrangements and just under half of the companies within the data set have linked their shareholders to dedicated website areas.
Only a few companies are live streaming or allowing shareholders to dial-in to remotely to the AGM. Companies also differ in their approach in providing dial-in facilities. For example, the Law Debenture Corporation plc has noted that shareholders must submit a written request for dial-in details, but Helios Towers plc has announced the dial-in details for its AGM in its RNS announcement.
A few companies have yet to issue their AGM notice and so have not yet announced adaptations for their AGMs. Additionally, some companies that have released a notice have announced that further adaptations are under consideration. For example, Midwich Group plc and Rotork plc are considering allowing questions to be asked via dial-in and Just Eat Takeaway.com N.V. is considering live streaming the AGM.
Allowing shareholders to vote online has comparatively been a more popular adaptation, and not all companies offering online voting are holding hybrid or virtual AGMs. For example, Midwich Group plc has restricted attendance to its AGM but has allowed for online voting via SignalShare.
Discussion and debate
Companies are separated in their approach to handling questions from shareholders. While some companies have provided for an interactive question and answer session, the majority of companies have taken to welcoming questions prior to the AGM with answers to be given after the AGM due to AGMs being restricted to ‘formal business’. It is also of note that some companies have not addressed how they will facilitate questions from shareholders which may give rise to criticism. Some companies (such as Forterra plc, IWG plc and St James’s Place plc) have decided to delay having a Q&A session at their AGM and instead provided that shareholders will be able to meet the board at a future date. Additionally, it is not just companies convening virtual or hybrid AGMs allowing for live Q&A sessions at the AGM. For example, Derwent London plc, Law Debenture Corporation plc and Schroders plc are restricting attendance at their AGMs but allowing for shareholders to dial-in with questions.
Change of venue
The majority of venue changes have been to a corporate premises. However, of note is the change to residential addresses by two companies: Hikma Pharmaceuticals plc and Smith & Nephew plc. In addition, PureTech Health plc has moved its AGM to be held in the United States, citing that most of its directors are resident there despite knowing that ‘a number’ of their shareholders are not located or resident in the United States.
Largely due to the substantive effect of the Stay At Home measures, only a minority of companies have reserved the right to introduce safety measures such as temperature checks and health questionnaires. Vesuvius plc has however addressed the potential relaxation of the movement restrictions and has noted in its notice that shareholders may be subject to safety measures and should notify the company of their intention to attend the AGM.
As announced by the Business Secretary on 28 March 2020, it is expected that amending legislation will be introduced to further assist companies hold AGMs during the coronavirus pandemic, with changes including greater flexibilities for holding AGMs online or postponing meetings. The current pressures that companies are facing in holding their AGMs may therefore be alleviated with the introduction of new legislation.
Where a company is otherwise proposing to allow for electronic shareholder participation, lawyers should carefully check that the articles allow for this. Companies may consider amending their articles to enable electronic participation in the future but should be mindful that virtual-only AGMs may be problematic once the coronavirus crisis has passed.
With further lockdown extensions possible, companies are edging ever closer to the statutory deadline for holding an AGM within six months of their financial year-end, and delaying the meeting will not be as likely an option as it was during the start of the coronavirus crisis in the UK. Whatever option or adaptation is considered, lawyers should be mindful of the expiry of a company’s current shareholder authorities.
Corporate lawyers should be mindful of the rights of all stakeholders. Current practices being adopted by companies during the coronavirus crisis have been subject to criticism by campaign groups such as ShareAction. ShareAction has written to the BEIS with concerns about the protection of shareholder democracy, noting that the proposals to allow companies to hold virtual AGMs should be temporary as they may alienate older shareholders who may be unfamiliar with using the technology required and allow boards to evade difficult questions.
ShareAction has asked the BEIS to issue guidance on how questions are raised and answered at digital AGMs, criticising the approach by Lloyds Banking Group for potentially evading public accountability in only allowing shareholders to email questions which may not be addressed at the AGM. The FRC and BEIS acknowledge the difficulty of directors meeting with company shareholders during this time and have issued guidance suggesting companies should hold ‘shareholder days’ later in the year to offer shareholders access to the board, as they would usually have at an AGM.
ShareAction has also criticised Rio Tinto plc who have proposed changes to their articles of association to allow for shareholders to participate by electronic means, as the company has not clarified if electronic participation is to be in place of in-person participation and ShareAction is concerned that such changes will allow the company to hold virtual AGMs in the future.
The months ahead will be very challenging for many companies, both commercially and administratively. Lawyers advising such entities in relation to meetings should seek to exploit the flexibilities and freedoms that may naturally exist, while complying with their client company’s constitution and the general law, as stated at any particular time.
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