Over the last few weeks, we've seen some important guidance released by the GC100 on the subject of how AGMs may be held both in 2021 and in future years.
There has been a growing conversation in the market as to whether the impact of the pandemic should be an opportunity to make some fundamental changes to the traditional nature of shareholder meetings. However, before we get to that point, we have to address the upcoming meeting season and one thing is clear, shareholders expect better opportunities for engagement in/around the meeting than had afforded them in 2020.
There is a general view as we enter the 2021 season that Companies have had the benefit of more time to make contingency plans to facilitate shareholder engagement within the restrictions imposed by company law, their Articles of Association and the evolving situation in relation to social gatherings and restrictions on travel by members of the public. If physical meetings are not possible, companies need to consider carefully how they can demonstrate shareholders are not being disenfranchised, perhaps through the use of technology or non-traditional methods for shareholders to hold boards to account.
The GC100's report entitled 'Shareholder Meetings – Time for Change
' appears to take several of the points raised by the FRC's October report (see the Registry Roundup article
from October 2020) and a recent ShareAction report considering the future of meetings. The GC100 recognises the benefit of virtual and hybrid meetings and feel that companies should be provided with the ability to choose the format of a meeting that best suits the needs of its shareholders.
The report sees that the pandemic is an opportunity for enhancing the existing shareholder meeting model which may now be considered antiquated, improving the ability of shareholders or stakeholders to hold the company to account and seek effective engagement with the board.
The report makes a number of recommendations including calling on the government to provide legal certainty in relation to virtual and hybrid meetings by amending the Companies Act 2006. It also requested the FRC make changes to their guidance on the Corporate Governance Code to recognise the importance of shareholders having the ability to ask questions electronically prior to the AGM. They also recommend that if companies choose to hold an engagement event prior to the end of the proxy voting period, it would serve as a better way to allow shareholders to engage and make appropriate voting decisions.
They have also produced a draft Code of Best Practice which will no doubt be reviewed as part of discussions taking place via market working groups on the subject over the coming months. The best practice code is split into three themes and focuses on practices where virtual meeting elements are being incorporated into a company's chosen meeting format.
- Dedicated area for the company to keep shareholders updated on the latest information on the status of the meeting.
- Clear instructions for the process of logging in, asking questions, and providing a voting instruction should be provided before the meeting, and where practical a reminder issued a few days prior to the meeting taking place.
- Virtual-only meetings: where articles are to be amended to permit virtual meetings, clear explanatory notes should be provided to ensure shareholders understand the circumstances as to when such meetings will be held (the report provides some suggested working – page 19).
- Shareholders to be provided with access codes through their preferred method of communication in advance of the meeting.
- Companies to promote engagement, dialogue and transparency just as if the meeting were held physically.
- Companies to choose the most appropriate format to facilitate engagement and not as a means of managing attendance or restricting shareholders asking questions.
- Meeting to be accessible in both video and audio-only format.
- Shareholders to have same rights of participation in a virtual environment as they would by attending physically.
- Shareholders have a right to speak and be heard via electronical facilities just as if they were attending physically. In addition to be able to ask questions through a telephone line or VoIP they should be able to ask questions electronically through a dedicated meeting application or send them to a dedicated email address.
- If a question is asked live though telephone or VoIP the chair should ensure (as far as practical) that the question is audible and visible to all shareholders in attendance. Shareholders should also be able to see/hear questions submitted electronically via a dedicated meeting application or which have been submitted in advance regardless of whether the question is answered.
- Grouping/moderation should be considered as appropriate.
- Chair should exercise their right to manage the conduct of the meeting virtually as they would in a physical meeting environment.
- Shareholders allowed to follow up on any answer given to a question raised at the meeting.
- Transcripts of the Q&A with all submitted questions should be available on the company's website after the meeting. Where a question isn't answered the transcript should contain an explanation as to why.
Companies should make clear the basis on which questions have been grouped/moderated.
To help you plan your 2021 shareholder meeting, we've a Virtual Shareholder Meeting Checklist
. This combines best practice and real-life client experiences, including managing over 2,000 virtual shareholder meetings globally in 2020.