04 May 2016
The practicalities – good planning is essential
Last month, we considered likely topical issues for AGMs in 2016. This article looks at the practical aspects. Some AGMs are large, at others you will be lucky if one external shareholder turns up – but in all cases good planning is key. An AGM checklist is recommended. There is a lot to think about and this is one instance where ticking boxes on a list is a good idea.
This is a time when the company secretary comes into their own. Sound knowledge of the law is required, as well as common sense, practical skills and an ability not to panic under pressure. If all goes well, everyone is pleased and if something goes wrong useful lessons can be learned for next time.
The provisions for company meetings are found in Part 13 Companies Act 2006 (the Act) and the articles. The general law of meetings will also apply. This can get complicated as some provisions in the Act override the articles but others may be varied by the articles. So it is important to check both documents thoroughly to ensure the correct interpretation.
There are additional requirements placed on traded companies and quoted companies. ‘Traded company’ is defined in s360C and ‘quoted company’ in s385 and both include companies on the main market of the London Stock Exchange (but not AIM).
For all plcs, the AGM must be held within six months of the financial year end. Private companies are not required to hold an AGM. Those that wish to do so should have all the relevant provisions in their articles.
The documents to be sent to members are the AGM notice and proxy form. Some of the contents are prescribed in the Act, with additional wording required for traded companies (s311). Three-way proxy forms are now best practice, to allow votes ‘for’, ‘against’ or ‘withheld’. Votes withheld are not counted, although commentators often like to include them with votes against to indicate a lack of support for the company’s management.
The notice should be marked with the date of posting, which will usually be after the date of approval of the accounts. It is essential that the notice and proxy are sent out in sufficient time. 21 clear days’ notice is required for an AGM for a plc under the Act and 20 clear working days’ notice is recommended best practice under the UK Corporate Governance Code.
When calculating this, the date of posting and the date of service are excluded. The date of service will be 48 hours after posting (see s1147) unless the articles provide otherwise.
Copies of the notice and proxy are put onto the company’s website and should be uploaded to the National Storage Mechanism (NSM) for main market companies. Both AIM and main market companies will issue a regulatory announcement to say the documents have been posted to shareholders. Main market companies must also put certain information on their website – see s311A.
For smaller companies it is essential to ensure the meeting will be quorate. If directors have shares, ascertain if these are held in their own names and check the quorum for general meetings. It is also important to know which of the directors will be present. If you are expecting someone to be there for a quorum but they are away on business, then they will need to complete a proxy form.
As more individuals hold their shares through nominees, there can be confusion about who can complete a proxy form. People (including directors) may try to submit a form but find it is rejected because the shares are not registered in their own name. It is a good idea to provide some help if you need the proxy appointment to meet the quorum requirements.
Although the rights of proxies and corporate representatives are now very similar, proxy forms have to be submitted at least 48 hours before the meeting, whereas a letter appointing a corporate representative can be brought along on the day. This can provide a useful back up if there are delays with getting any proxy forms submitted − whether for an individual director or a large institution whose support is wanted.
It is important to monitor the proxy votes coming in and it may be desirable to chase up votes of large shareholders, particularly if there is a contentious item of business. Even if the proxy votes look fine, be aware that shareholders who have lodged a proxy may attend on the day and change their vote – so there is no room for complacency.
The room needs to be large enough and this can be a challenge when you have no idea who will come. You can ask shareholders to register their intention to attend but this will not stop others coming and may not give a reliable indication of numbers.
It is possible to have a meeting in several places at once, although the technology needs to be reliable. A company’s articles should contain detailed provisions about such meetings to ensure they can be properly run.
You will need somewhere for members to sign in. For customer facing organisations, helpdesks are usually provided in an attempt to keep customer service issues outside the meeting. There should be a clear policy on which non-members are allowed to attend and a list of any guests invited (including advisers) should be drawn up in advance.
If media representatives turn up there should be designated staff or advisers to meet them, whether or not they are to be allowed in.
You may wish to have security arrangements for bag searches, for example. These can be covered in the articles, which can defuse any objection from shareholders. Another challenge is preventing people recording the meeting on phones or other devices. An announcement at the start of the meeting can make it clear this is not allowed but policing it at a large event may be difficult.
Refreshments – the rule is that the more you provide, the larger your meeting is
likely to be.
Plan for a poll, even if one is not anticipated. Many large companies now take all votes on a poll and some have changed their articles to require it. It is more democratic as all votes cast are counted. For smaller companies, a show of hands vote can still suffice (and is more cost effective).
However, if adding in the proxy votes might change the result of a show of hands vote, then the person chairing the meeting should call a poll. This will usually be conducted by the registrars and poll cards will need to be prepared in advance if electronic voting handsets are not used. The corporate governance code recommends that the proxy figures are given out at the meeting (E2.2).
Listed companies must issue an announcement giving the result of the meeting and put this on their website. For main market companies this will include either the votes cast on a poll or the proxy figures. For AIM companies a short announcement of the result is acceptable.
If there is a high proportion of votes against a resolution, the code recommends that the directors state what they intend to do about it and such a statement should form part of the announcement. For companies on the main market, copies of non-routine resolutions should be uploaded to the NSM. Reference to this should be made in the announcement of the results.
Finally, the minutes of the meeting have to be prepared and copies of relevant resolutions sent to Companies House – including those in relation to share allotment and buyback authorities, changes to the articles and so on, together with a copy of any new or amended articles.
When it is all over, do not forget to review your checklist and procedures notes while the event is fresh in your mind so that anything you decide to do differently next year does not get forgotten.