You may remember that on 28 March 2020 Alok Sharma MP announced that the Government would look to introduce legislation as soon as possible to assist companies with difficulties caused by COVID-19 in complying with statutory obligations to hold meetings and meet filing deadlines.
Yesterday, the BEIS and FRC released a joint Q&A document designed to address some of the questions companies may have in relation to complying with those obligations whilst waiting for Parliament to pass the anticipated legislation and to assist with planning over the coming months.
The key takeaways are that the BEIS and FRC envisage the legislation to have retrospective effect dated back to 26 March 2020 and is anticipated to have effect until the end of September 2020 although the Government will retain flexibility to extend the provisions beyond then if required. The measures will apply to companies, mutual societies and charitable incorporated organisations.
The Q&A’s go on to outline more specific details about what the Government intends to deliver and how this addresses some of the areas where companies are facing a balancing act between protecting shareholders’ interests and individuals health, safety and wellbeing. These include:
- Notices: if the legislation has not been passed by the date on which a company is required to serve notice of its AGM, the company should serve the notice and inform shareholders if it intends to delay the meeting once the legislation has been passed allowing it to do so;
- Voting: any votes taken relying on the proposed legislation before it is passed into law cannot be guaranteed as being valid;
- Forum of AGM: temporary flexibility for companies to override prescriptive requirements in their articles relating to the forum of the AGM e.g. where articles require a physical AGM. Where companies use alternative methods the FRC expects those companies to use reasonable endeavours to provide shareholders with alternative means of engaging with the company prior to the AGM and to utilise a range of channels to engage with shareholders and ensure that any questions are addressed at, or prior to, or failing that as soon as possible after the AGM;
- Other meetings: the legislation will apply the same grace periods to meetings e.g. EGMs or other meetings of the members that are required during this period. The guidance also envisages that shareholder or member meetings will be agreed once the social distancing restrictions are lifted;
- Review of existing authorisations and articles: companies should review any previous authorisations to determine if they will remain valid if the upcoming AGM is delayed more than a year after the date of the last AGM. They also encouraged companies to consider whether their articles of association could be refreshed going forward to allow flexibility in the future.
- Best practice: it is anticipated that a further guide as to best practice will be issued over the coming months to give companies a clearer steer as to what the new measures require.
Whilst this will be welcome relief once the legislation has been passed, a word of caution, as these provisions have not yet been passed into law any company seeking to avail themselves of any anticipated retrospective protections should be careful and conduct their own risk assessment before proceeding.
Written by Amy Carr.