Shareholder meetings under the Corporate Insolvency and Governance Act 2020

Of interest to all involved in the arrangement of meetings

On 26 June, the Corporate Insolvency and Governance Act received Royal Assent.  It is a complex measure, making significant changes to insolvency and corporate governance law to reflect the needs of companies and other organisations during the COVID-19 pandemic. Leaving aside the significant changes to insolvency regulation, we are talking here about nothing less than a significant erosion – albeit temporary and very necessary – of shareholder rights enshrined in the articles of association and the Chartered Governance Institute has today published a further update to its guidance on shareholder meetings during the COVID-19 pandemic to reflect these changes.

Until 30 September (and the Government has the power to extend this date if necessary until 5 April 2021) company meetings do not need to be ‘held at any particular place’, may be held and votes cast ‘by electronic means or any other means’ and without members ‘being together at the same place’.  Members do not ‘have a right to attend the meeting in person, to participate in the meeting other than by voting, or to vote by particular means’ regardless of any provision in the law, or regulation, or ‘the constitution or rules’ of the organisation. The period in which the meeting must be held is also extended to 30 September. Similar changes apply to the rules relating to the submission of filings to Companies House.

These are significant changes and companies need to think carefully how to arrange their shareholder meetings during the pandemic period. One message that came through very clearly in our webinar with Sacha Sadan, Director of Investment Stewardship at Legal & General Investment Management, on 29 June was that although investors believe that investee companies should put their stakeholders first during the COVID-19 crisis, they are watching keenly to see how companies behave. And behaviours will have consequences. Investors will support companies during this difficult time, but also hold them to account. Issues such as tax transparency, capital management, diversity, over boarding, data security and climate change will remain important, and companies will, rightly, be judged on how they respond to the conflicting challenges facing them. Good governance and sustainability will be the building blocks of a better future.

The new guidance has been drafted by a Working Party of the City of London Law Society Company Law Committee and the Chartered Governance Institute, with the support of GC100 – the Association of General Counsel and Company Secretaries working in FTSE 100 Companies, the Investment Association and the Quoted Companies Alliance. The Department for Business, Energy and Industrial Strategy and the Financial Reporting Council have both endorsed this guidance note, which covers:

  • how companies can hold shareholder meetings under the Act;
  • how they can limit attendance at shareholder meetings;
  • what rights members have;
  • whether companies can limit the manner in which members vote;
  • whether members have the right to cast their vote directly at the meeting itself;
  • the position where a company’s articles of association say something different to the Act;
  • whether a company which has already issued its notice of meeting can change the format of its meeting to one allowed under the Act;
  • what difference the Act makes, given that companies have already been holding meetings on an adapted basis during the coronavirus lockdown;
  • whether companies that have already held their meetings on an adapted basis during the coronavirus lockdown need to do anything;
  • whether the Act changes a company’s AGM deadline;
  • whether the meeting provisions of the Act apply to charities; and
  • whether companies can hold a physical meeting.

The guidance note can be downloaded here

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