AGMs 2020 - an opportunity for change

​Findings

• 80.7% (163 companies) held ‘closed’ meetings
• Of the 163 companies, 81.6% had arrangements to allow shareholder Q&A, and 18.4% (30 companies) seemly offered no way for shareholders to engage either before or during the meeting.
  
• 30 companies held ‘open’ meetings
• Of those 30, only 12 used technology that wasn’t just a webinar/audiocast
• Due to the lack of clarity regarding the term ‘place’ within s.311 and s.360A of the Companies Act 2006 many companies avoided using virtual or hybrid meeting solutions until the emergency/supporting legislation came into force. Consequently, many companies opted for ‘closed’ meetings in March and April.

The interpretation of the word ‘place’ in connection with a meeting within the Companies Act is something that the FRC is conscious that needs to be addressed. They state that they will be working with BEIS to seek clarity for the market.
 
Unsurprisingly, ‘closed’ meetings with no opportunities for shareholder engagement have been seen as disenfranchising retail shareholders and not being aligned with the principles of the UK Corporate Governance Code.
 
The report draws attention to a number of good and bad practices in this regard, such as:

​Those companies who utilised technology to facilitate a ‘virtual’ or ‘hybrid’ meeting allowing live Q&A and voting, were seen by shareholders as being better at engaging with their members, and it was felt that boards could better demonstrate their awareness of a situation or position.
 
Companies need to be mindful that as we move into the 2021 season restrictions on public gatherings and movement will likely still be in place. The FRC suggests therefore that they should actively prepare to plan to move away from a traditional AGM.
 
The report recommends that companies should engage major shareholders ahead of amending their articles (should this be necessary) and focus on allowing flexibility in their meeting format. If they are seeking to allow ‘virtual only’ meetings, they must provide greater guidance to their shareholders as for reasoning, otherwise, it is likely to receive strong opposition.
 
There have been some strong feelings expressed among shareholders that they haven’t had the ability to vote after they have heard from the board, by virtue of the format of some meetings this season. One suggestion that has been made therefore is to separate the formal business of the meeting (i.e. the voting) from that of the presentations and Q&A, which could occur prior to the voting closing.
 

The future is fully digital

The UK is still behind the curve in its acceptance and use of technology to hold virtual or hybrid meetings and there are a number of factors causing this, not least the different interpretations of relevant legislation, the views of shareholders, availability, cost and confidence in the technology.
 
The report rightly reflects the fact that the technology is there and has been proven, both in this market and elsewhere in the world, and that maybe the pandemic is the force that is going to move the dial on its acceptance and usage.
 
There are some distinct benefits to shareholders in making technology to facilitate remote participation available, including a reduction in costs associated with travelling to meetings and removing a restriction on the number of meetings they can practically attend in a single day. Companies also need to consider if adopting increased technology can have cost savings in other aspects of their meeting such as venue hire or ensuring the international based directors do not need to travel for the meeting.  
 
It is recognised in the report that while there is one main supplier of virtual and hybrid meeting technology, costs may be a concern for companies. However, as more companies adopt the technology, more providers may emerge.
 
The FRC suggests that once rules on social distancing are relaxed, companies should still consider using technology to enhance their shareholder meetings and facilitate remote participation.
 
The FRC also recognises the importance of electronic communications and call on all shareholders to supply an email address when requested by the company. They also see the benefits of an email address being provided when becoming a member in the first instance and having it passed to the company or their agent via the broker, something the registrar community have long advocated for.
 

Next steps and best practice

The FRC and BEIS are intending to look at ensuring clarity regarding the ability to hold virtual and/or hybrid meetings in future.
 
A stakeholder group will be established to consider improvements to AGMs, whether through legislative change or alternative measures to allow flexibility.