Coronavirus and your AGM - some things to consider
Date: 01 April 2020
Author: Craig Beeston, SGA Programme Manager, The Chartered Governance Institute
The current Covid-19 pandemic is exercising people, society and companies in many different ways. The holding of your organisation’s annual general meeting may seem comparatively low on the list of priorities when compared with the wider upheaval to life caused by Coronavirus, but it is a statutory requirement for many and is at the forefront of the minds of company secretaries and governance leads across the sector as AGM season approaches.
The outbreak has significantly disrupted work plans and habits, and the nationwide lockdown now prohibits gatherings of more than two people. Attendance by a shareholder or member at a general meeting (other than one specifically required to form a quorum) does not qualify as being essential for work purposes. Many venues booked to hold meetings are currently closed and may still be by the time meetings are due to take place. Non-essential travel is punishable by a fine or even arrest. Plus, the particular risks which the Coronavirus poses to certain demographics may prompt organisations to give consideration to those who may be among their most active members.
Consequently, AGM plans have been thrown into turmoil and the prospects for clarity on when meetings may be held – certainly in a traditional format – seem uncertain.
The Charity Commission had already announced that it will take a ‘flexible and pragmatic’ approach to charities experiencing problems as a result of the pandemic, recognising the difficulties in filing returns and accounts and holding meetings. It acknowledged that some charities may have no choice but to cancel or postpone AGMs and other meetings and advised that trustees should record any such decision in order to demonstrate good governance of the charity. The Office of the Scottish Charity Regulator similarly said it would be ‘understanding and proportionate’ where charities did not hold an AGM and so were not in fulfillment of their governing documents.
Companies do not have such flexibility, but at the weekend, the Business Secretary, Alok Sharma, announced that legislation would be introduced granting greater flexibilities for companies, including holding AGMs online or postponing them.
This all presents difficulties for organisations, uncertain as to if or when they can hold their AGM or faced with the prospect of doing so in an unfamiliar way.
Time spent planning – and seeking advice – is always time well spent, but will be particularly important now, particularly as some organisations are facing a narrow time window before their meetings must be held. While the contents of the legislation to come is not yet known, boards and governance leads will be weighing up their contingency plans.
The options available to organisations facing these issues are determined by two things: the law and their governing document. Careful reading of both before deciding what steps to take is absolutely essential.
Public companies must hold an AGM within six months of their financial year end. Private companies that are traded companies must do so within nine months, unless otherwise stated in their Articles of Association. Under the Companies Act 2006, private companies that are not traded companies are not obliged to hold AGMs, though some may be required to do so by their Articles.
This is inevitably a pressing concern for companies, particularly those which had 31 December 2019 as their most recent ye