Introduction

On 30 March 2020 the government implemented new measures that, among other things, restrict public gatherings to no more than two people. These measures largely reflect similar restrictive measures implemented by the UK government on 26 March 2020 (the Stay-at-Home Measures).

In light of the Stay-at-Home Measures, supplemental guidance has been issued in the United Kingdom.(1)

This article discusses how Jersey companies and investors can best manage the upcoming annual general meeting (AGM) season in light of the restrictive measures and the developing COVID-19 pandemic.

Legal requirement

COVID-19 is putting pressure on boards to make quick decisions about upcoming AGMs, with the health and safety of all stakeholders attending being the paramount consideration, and to communicate with their investors about how best to proceed in such uncertain times.

Public companies incorporated in Jersey have a legal obligation to hold an AGM in each calendar year with no more than 18 months elapsing between AGMs.

Therefore, boards have a legal obligation to act; but what is the best way forward and what options do boards have when dealing with such a difficult situation?

Key points from supplemental guidance

Although the guidance below applies only to AGMs to be held in the United Kingdom, Jersey public companies should also follow the advice for AGMs to be held in Jersey. If AGMs are to be held elsewhere, directors should be mindful of specific local legal requirements as regards social distancing and stay-at-home measures:

  • Shareholders cannot attend AGMs in person while the Stay-at-Home Measures are in force. Shareholders should be encouraged to vote by proxy. Companies may want to encourage the submission of questions for the board in writing with answers to be published on the company website.
  • If an AGM notice has been sent, the company should issue a further announcement stating that public gatherings of no more than two people are prohibited under the Stay-at-Home Measures and that shareholders therefore cannot attend the meeting in person.
  • The chair of the AGM can use their powers to preserve order at the AGM. As attendance of more than two people at an AGM is prohibited by the Stay-at-Home Measures, the AGM's chair should use those powers to exclude excess attendees.
  • Most Jersey public companies have a quorum of two. A quorum can usually be obtained by two members being present in person or by proxy. In extreme circumstances, it may be appropriate for the meeting's location to be the home of a director or employee.
  • Companies that have already convened an AGM for a venue that has since become unavailable will need to find an alternative venue. Companies should follow the postponement provisions in their articles to address change-of-location concerns. Companies that do not have provisions in their articles to enable them to postpone their meeting or switch to an alternative venue should, in law, adjourn the meeting from the planned venue to an alternative venue.

Hybrid AGMs

Hybrid AGMs are an obvious solution to combating social gatherings in the wake of COVID-19 and the restrictions which are being placed on physical meetings, but such provisions must be expressly permitted by a company's articles of association.

The hybrid AGM is an extension of the conventional meeting. The concept was introduced to add flexibility and take advantage of technology to encourage shareholder participation, while still allowing for a physical meeting to take place somewhere in the world which shareholders can attend if they wish.

Companies that can convene a hybrid AGM should do so and encourage all shareholders to use the technology available to attend the meeting rather than attending in person.

Shareholders who cannot embrace technology should be encouraged to submit a conventional proxy form to allow them to be represented at the meeting and vote and count in the quorum.

While all shareholders have the right to attend the AGM in person if they so wish, this is now subject to travel and gathering restrictions.

Non-compliance with a company's constitutional requirements poses a risk for the board which could void the business of the AGM or at least leave it open to challenge. If possible, boards may wish to consider proposing resolutions at upcoming AGMs to specifically allow hybrid shareholder meetings to take place so that this flexibility is in place, and beyond doubt, for future meetings.

Adjourning or postponing

AGMs cannot always be automatically postponed or adjourned – not least where such postponement would exceed the statutory time limit for convening such a meeting.

If the AGM can be adjourned or postponed and remain within statutory limits, the board should consider whether this would merely delay to a time when the same problem may remain.

Boards may still be faced with making difficult decisions, and attempting to hold their AGM (provided that a quorum is present), especially if many shareholder votes have been submitted by proxy, could be the best option.

If a physical venue for the meeting is unavailable due to closures, this will need to be dealt with on a case-by-case basis. Companies should follow the guidance recently issued by The Chartered Governance Institute and separately by the UK Financial Conduct Authority on how best to adapt corporate governance measures in such difficult times. Although the guidance is not directly applicable to Jersey companies, it seems to provide the best current corporate governance practice available.

Directors facing the decision to change a venue post-circulation of the AGM notice should consider urgently issuing a supplemental notice detailing a change of venue. Any such notice should encourage the use of proxies or technology to attend the AGM virtually (where permissible in the articles of association).

Proceeding in difficult times

Top tips for companies that must proceed with their AGM are as follows:

  • Shareholders should be informed of any changes to plans or the AGM's format as early in the process as possible.
  • Shareholders should be encouraged to vote by proxy (a vast majority of public companies will already have some form of electronic proxy facility). Companies should check whether shareholders can be present by proxy and whether they count towards the quorum.
  • Companies should embrace technology – but only where their articles of association permit – and encourage shareholder participation using hybrid AGM provisions.
  • The AGM agenda should be streamlined to deal only with statutory business.
  • No advisers or senior executives should be present in person (they can be available via electronic means).
  • No presentations which are not part of the core statutory business should be delivered.
  • No refreshments should be served.

For further information on this topic please contact Simon Dinning, James Fox or Alexander Curry at Ogier by telephone (+44 1534 504 000) or email ([email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.

Endnotes

(1) A copy of the original guidance can be accessed here and a copy of the supplemental guidance can be accessed here.