One of the main principles in the Corporate Governance Code is that ‘for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective engagement with, and encourage participation from, these parties’.
We are now well into the Annual General Meeting (‘AGM’) season, and we are seeing several different approaches to the holding of the AGMs
For most Irish companies, who have a December year-end, one of the first considerations is whether to hold or postpone the meeting. For those taking the postponement option, they need to be mindful of the requirement to hold the AGM within 15 months of the last AGM, so there is a summer deadline looming.
We see AGM venues being changed from the original venue, such as a hotel to the registered office of the company. Attendance reflects a minimum number of shareholders needed to meet the quorum. Those in attendance (all via telephone or video link) are typically the Chair, the Company Secretary and some members of the board or senior management. Shareholders have been asked not to attend in person. Usually there are three variations of AGMs taking place:
Shareholders must vote by proxy and can submit a question in advance of the meeting. These meetings are not accessible to shareholders via webcast, therefore, shareholders have no voice during the AGM. When voting on the resolutions, the Chair will call a poll so that all shareholder votes submitted via proxy are included. This avoids resolutions being carried by a show of hands from those shareholders who are in attendance.
In the majority of cases that we looked at, we have seen a more inclusive variation of the closed AGM where these meetings are accessible to shareholders via webcast, however, shareholders cannot vote or ask questions during the AGM.
A final variation that we have observed is an enhanced version of the semi-closed AGM where shareholders are given the option to interact with the board and ask questions during the live AGM. This is probably the closest that we can get to a ’real AGM’ within the constraints of the Covid-19 restrictions and adherence to the Companies Act 2014.
As the AGM is one of the few opportunities shareholders have to question the board, engage directly with management and hear the views of other shareholders, there has been some disquiet regarding “closed AGMs” from company law and governance perspective. However, if an AGM is not held, final dividends cannot be declared, directors cannot be re-elected, and share allotment authorities cannot be approved.
If a company decides to hold a “closed AGM”, it is essential that the rationale for this decision is clearly explained and that shareholders are permitted to view the AGM proceedings, and the technology should be user friendly for all.
In the midst of all the above, boards need to be mindful of their duty to engage with shareholders. We welcome where shareholders have the opportunity to put questions before the committee and where they are actively encouraged beforehand to submit their votes by proxy. This is particularly relevant where there are contentious resolutions on the Agenda of the meeting for consideration. Keeping shareholders up to date through the website is strongly advised.
There is much advice available on the subject online. We would draw members attention to the recently published guidance of our Institute, https://www.icsa.org.uk/knowledge/resources/agms-and-impact-of-covid-19
In all cases, its is advisable to check the relevant provisions of the constitution of the company before any decision are made on holding or postponing and when holding, how the AGM will operate.
John Burns is Business Development Manager for The Chartered Governance Institute in Ireland. John was previously Senior Manager, Corporate Secretarial Services at BDO, Dublin where he managed a large portfolio of Company Secretarial clients and an Independent Secretariat for a redress programme for a large financial institution.
John is a Fellow of the Institute, and he is a former Assistant Secretary of Allied Irish Banks, p.l.c. where he was secretary to over 60 of the Bank’s subsidiary companies and where he spent over 11 years working in various governance roles. John is the current Chair of the Education Committee.
He has been a member of the Irish Region Council since June 2012 having previously served as a member from 2003 to 2007.