Physical, Virtual or Hybrid: What will be the “new normal” for future AGMs?

September 12, 2020

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3 min read

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What's going on here?

This year’s Annual General Meeting (AGM) season largely coincided with nationwide lockdown and strict social distancing. This was very alarming for companies, who have a statutory obligation to hold their meeting within six months of the financial year. Companies were forced to adapt to new legal rules and technology which has thrown the future of physical AGMs into question.

What does this mean?

AGMs are annual gatherings between the shareholders of a company and its board of directors. AGMs are mandatory for some companies according to their articles of association and the provision is binding until the articles are amended. It’s usually the only time that they meet and is vital for corporate governance – encouraging shareholder participation through discussing the company’s strategy and performance, whilst also allowing for questions. 

Nationwide lockdown meant that traditional physical formats of AGMs could not take place, forcing the Government to allow companies legal flexibility through the Corporate Insolvency and Government Act 2020. This short term Act allowed companies to shift a physical meeting to an online format regardless of their articles and this has been applied until the 30th of September.

This relaxation has caused a large increase in virtual events. For example, the Co-op livestreamed and posted its AGM on YouTube, with a lively discussion taking place between shareholders in the sidebar, whilst Morrison’s set up a telephone service.

What's the big picture effect?

The unprecedented restrictions caused by the pandemic has accelerated a trend that was well underway, with the benefits of online meetings being recognised by many. But what will this switch to online AMGs look like and what will the role of lawyers be?

AGMs are often under-attended and under-valued, with the importance of the event not always clear. Statistics from the Link Group and the UK Share Registrar reveal that in 2018 and 2019, less than 6% of registered shareholders voted at AGMs in the UK, while 1/3 of meetings passed with no questions asked. However, the role of technology and virtual events spurred on by the pandemic may make companies rethink what the purpose of the AGM is and how they should make it most effective. ShareAction, a responsible investment campaign group, believes that this season of meetings will lead to a brand new approach, potentially moving AGMs towards a hybrid format which extends to include stakeholders – employees, suppliers, customers. It is likely that if companies do choose to go online for future AGMs, they will not be completely virtual. A hybrid meeting is a combination of both virtual and physical and enables shareholders to either physically attend the meeting or participate online. This provides a middle ground and offers the option for people to attend the live experience and have the ability to scrutinise the board in person.

The online transformation of AGMs will cause multiple concerns and adjustments for businesses which lawyers will have to help mitigate and advise on. Importantly, as companies have their AGMs online during Covid-19, there is no doubt that there will be an increase in companies updating their articles of association to include this flexibility in the future – lawyers specialising in company law will have to instruct on this complex area of law. We also may see an extension on the Corporate Insolvency and Government Act to allow companies more time to put in place plans for this year. 

Furthermore, to guarantee that there is no infringement on shareholder rights, lawyers will have to ensure that companies who are offering virtual or hybrid meetings have the correct identification procedures and shareholder voting in place. Also making sure shareholders have the ability to ask questions in advance. On top of this is the obvious need for cyber security, sound technological system providers and confirmed privacy. This is just another aspect of business which Covid-19 has impacted, and in a way it seems that it is not possible for AGMs to step backwards to the format which was previously in place.

Report written by Rebecca Lax

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