The Annual General Meeting has always been a key date in a company's calendar. The AGM offers shareholders, most notably retail investors, their yearly chance to ask questions of the board and to express views on the performance of management. For companies themselves, the AGM is critically important as the event at which the shareholder resolutions necessary for the functioning of the business for the following year are obtained.
The coronavirus pandemic has had a huge impact on the way in which AGMs are conducted. Since the UK Government first introduced social distancing rules and restrictions on public gatherings, companies have not been able to invite shareholders to attend the AGM at a physical venue as would traditionally be the case.
Amongst the UK's large insurance companies, most of the AGMs held in 2020 were "closed meetings". Only the minimum number of directors and employees required to form a quorum and conduct the formal business of the meeting attended. In most cases, there were no speeches from directors or questions from the shareholders – which in normal circumstances would both be main items on the agenda at any AGM. Only the most essential procedural steps relating to the passing of the resolutions were carried out, with shareholders required to vote in advance by appointing the chairman of the AGM as their proxy.
A brave new world
As we approach the 2021 AGM season, with coronavirus restrictions still in place despite the gradual emergence from lockdown, companies are again making preparations to have closed physical meetings. However, as with their peers in other industries, the big insurance companies, such as Aviva and Phoenix, are now offering shareholders the opportunity to "attend" the AGM remotely, giving them some of the same rights and experiences of a shareholder attending in person through an online portal provided by a company called Lumi. These so called "hybrid meetings" have been strongly encouraged by the investor bodies who as ever are eager to see fulsome shareholder engagement.
The online portal enables shareholders to watch a live stream of the AGM, vote on resolutions electronically during the meeting and ask real-time questions to the board via a messaging portal. Some companies are going one step further by providing a telephone line whereby shareholders can speak to the directors themselves to ask questions.
This is a brave new world for most companies and offering electronic facilities does not come without a degree of risk. If there are technical issues with the platform or its functionality, the AGM will likely have to be adjourned as otherwise there is a danger that a shareholder could challenge the validity of the whole AGM and the effectiveness of the resolutions passed. This is one reason why some companies are still showing caution and refraining from providing or limiting the electronic facilities available, in order to minimise the elements which can go wrong.
Yet as more companies become comfortable with the technology and as shareholders grow accustomed to the ability to participate remotely, it is likely we will see ever increasing numbers of companies offering the facilities. Whilst not suitable for everyone, larger companies with significant retail shareholder bases may never return to a physical only meeting. Investor bodies will equally look to champion the hybrid meetings as another way of promoting effective engagement with shareholders.
As with many aspects of life, coronavirus will have a long-lasting influence on how AGMs are conducted. Companies and shareholders should be ready for electronic participation to be part of the "new normal" of future AGMs.
Fergus Grady, Clifford Chance Senior Associate, Financial Institutions Group
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Please note this blog post was written by a Clifford Chance LLP employee. Clifford Chance LLP is the parent company of Clifford Chance Applied Solutions (CCAS). The content within this post does not constitute legal advice.