ICSA Offers Guidance for UK Corporates to Deliver AGMs More “Flexibly”

Corporates advised to offer investors “as much electronic engagement as possible”.

The Chartered Governance Institute (ICSA) has provided UK corporates with interim guidance for delivering annual general meetings (AGMs). This follows the decision by UK government to not further extend the Corporate Insolvency and Governance Act 2020 (CIGA), which will come to an end in March 2021.

The Act has enabled the relaxation of certain reporting requirements within the updated 2006 Companies Act (such as Section 172) throughout the pandemic, but a more permanent policy will not be issued in the short term. In the meantime, companies will need to adopt a more “flexible approach”, the institute noted, dependent on the direction longer-term legislation might take.

Although CIGA’s provisions end in March, the timetable laid out by the Prime Minister this week means general meetings will likely be required to be held on a closed basis until at least May 17 and possibly until at least June 21.

“The central point to be borne in mind, whatever the conditions that might arise, is the need to ensure that shareholder engagement is as effective as it can be given the circumstances,” said Peter Swabey, Policy and Research Director at the Institute.

The guidance was prepared in association with the City of London Law Society Company Law Committee and supported by both the Department for Business, Energy and Industrial Strategy and the Financial Reporting Council (FRC). It involves analysis of the legal issues corporates face if they are hosting an AGM after the end of March, good practice recommendations reflecting the expectations of regulatory bodies such as the FRC and sample wording extracts for the AGM circular.

Corporates should look to encourage “as much electronic engagement as possible” within their physical AGM structure in order to allow all shareholders to attend and contribute, Swabey added. “This will give shareholders confidence that they can engage with the business of the meeting without physically attending,” he said.

The idea of a hybrid AGM model was previously suggested by non-profit organisation ShareAction in its future AGM report. The organisation further encouraged more year-round engagement with investors beyond the one meeting a year, allowing for regular communication during a changeable environment, such as has been experienced with the pandemic.

The Articles of Association, while not expressly enabling the adoption of hybrid AGMs, don’t explicitly prevent corporates from taking this course of action either, ICSA noted.

In the longer-term, ICSA has said its policy objective is to “persuade the government to introduce legislation to enable companies to hold general meetings flexibly”.

“The FRC welcomes this further guidance. We encourage companies to use as many channels as possible to allow their shareholders to participate before and during the AGM – making full use of the flexibilities available in their Articles of Association,” said Maureen Beresford, Head of Corporate Governance for the FRC.

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