Coronavirus - FRC publishes guidance on best practice for holding AGMs - UK

• United Kingdom

• Coronavirus - Regulatory issues
• Corporate

10-06-2020

In the light of the Corporate Insolvency and Governance Bill 2000 (CIGB), which the UK Government introduced into the House of Commons on 20 May 2020 and which is currently making its way through the House of Lords, the Financial Reporting Council (FRC) have supplemented their Q&A on AGMs published on 14 May 2020 with some guidance on best practice for holding annual general meetings (Guidance).

For details of the matters covered by the FRC Q&A published on 14 May 2020, see our earlier briefing here. Other than noting the passing of the CIGB through Parliament, the content of the Q&A has not changed.  This latest Q&A from the FRC also supplements the earlier Q&A on AGMs published on 17 April 2020.

The corporate aspects of the CIGB, including the temporary flexibilities for holding AGMs, are discussed in our briefing here.

What does the guidance on best practice cover?

The Guidance, set out at at Appendix 1 to the Q&A, notes that the FRC does not anticipate that all organisations will have to exercise the flexibilities to be granted by the CIGB to their full extent. There is effectively a scale of options set out in the Guidance for companies to consider.

Where companies, having balanced the safety of their members with the opportunity for them to engage with the board, conclude that a meeting which all members are entitled to attend, is not tenable, they should consider whether there is still scope for a physical meeting to be held with a representative cross-section of all members. The Guidance states that this should be done “with the consent of the community of members”, and that all shareholders should be able to ask questions before any voting at such a meeting takes place. It is unclear how facilitating such a meeting and obtaining shareholder consent would work in practice, and the Guidance does not expand on this, and this method does not appear to be viable unless and until social distancing measures are further relaxed.

Where physical exclusion of members is necessary, companies should explore the possibility of a virtual meeting. Where this is not viable due to technology constraints, organisations might look to webcast their AGM over their website and give viewing members the opportunity to raise questions prior to the meeting. Wherever possible, answers should be provided before voting takes place, or proxy voting closes.

Where member engagement in the AGM is limited, companies should look at how they can accommodate members through events later in the year.

Other best practice essentials include:

• Timely communications and clarity on proxy voting.
• Explaining to members how the meeting will take place and any communications prior to the meeting.
• Providing the opportunity to ask questions and receive responses prior to voting, either at a real time online meeting or by proxy, with the answers to any questions raised being made available.
• Offering all shareholders the opportunity to attend a physical meeting once the current restrictions are lifted.

The Guidance notes that over the longer term, there may be benefits in moving to a hybrid AGM format that allows attendance both in person and on-line. Later in the year, the FRC, working with others, intends to produce an assessment of best practice for holding hybrid AGMs. However, once the temporary relaxations which are contained in the CIGB come to an end, in the absence of a more permeant legislative solution, companies would require provisions in their Articles of Association that facilitate hybrid AGMs.

When will the CIGB become law?

The CIGB had its second reading, completed its committee and report stages and had its third reading in the House of Commons on 3 June 2020. It went to the House of Lords for consideration without substantive amendments to the corporate aspects discussed in our briefing below. The Bill is due to have its second reading in the House of Lords on 9 June 2020. It is scheduled to move to the committee stage in the House of Lords on 16 June 2020 with its third reading on 23 June 2020.

Useful links

Updated FRC Q&A and Best Practice Guidance (8 June 2020)

Coronavirus – Corporate Insolvency and Governance Bill (Corporate aspects)

Coronavirus – Further Guidance on holding AGMs