The social distancing measures implemented by the government in response to the COVID-19 pandemic have prompted many businesses to adapt their daily practices and governance at relatively short notice. This briefing considers some practical and logistical considerations that can assist companies and their directors and officers in navigating the management of the business during this rapidly evolving period.
Many UK listed companies are currently preparing for their annual general meetings (AGMs), as the Companies Act 2006 requires a public company to hold an AGM within six months of its financial year end. The social distancing measures implemented by the government with the associated restrictions on public gatherings mean that most UK listed companies will need to consider the changes required to their traditional AGM format.
Although UK public and listed companies have recently been granted concessions in the form of a three-month extension to the accounts filing deadline at Companies House (see further “Companies House filings” below) and an additional two months to publish annual financial reports for Main Market companies (three months for AIM companies), these concessions do not discharge the requirement to hold an AGM within the statutory deadline, and the government has yet to publish any legislative changes or guidance on this subject.
A checklist of non-exhaustive key considerations surrounding alternative AGM arrangements is set out below.
If it is not possible to hold an AGM in the short-term, UK public companies could consider the following options:
In addition, UK public companies considering holding an AGM outside of its usual corporate timetable will also need to bear in mind the expiry date of its existing shareholder annual authorities (e.g. in relation to share allotments, the disapplication of pre-emption rights and share buy-backs) which typically expire on the earlier of the next AGM date or 15 months after the date of the AGM at which they were granted, implications for any FCA regulatory disclosures included in the annual report that may need to be updated and the knock-on effect of delays in approving final dividends and new remuneration policies.
ICSA (the Chartered Governance Institute) has published additional guidance on contingency planning for AGMs during the COVID-19 pandemic (supplemented as of 27 March 2020), which can be accessed here. The FCA has also published the 27th edition of its Primary Market Bulletin, which is dedicated to COVID-19 and UK listed company-specific issues (updated as of 20 April 2020 and available here), and recognises that the effective exercise of shareholder rights (including through general meetings) may need to involve virtual methods as a result of the pandemic.
Company directors may find that meetings are required more frequently to deal with the challenges facing the business as a result of COVID-19. Many boards routinely use conference calls as a way to hold board meetings remotely.
When deciding whether to hold a board meeting electronically or by telephone, first recourse should be made to the company’s Articles. Many Articles expressly state that directors can convene their board meetings electronically. For companies incorporated with Model Articles, Article 10(2), provides that “it is irrelevant where any director is, or how they communicate with each other”. For older companies incorporated with Table A Articles, the position is less clear, however it is generally accepted that board meetings can be held by telephone or virtually in the absence of any express wording in the Articles to the contrary.
When holding a virtual or telephone board meeting, in the interests of good order it is advisable to:
Written Board Resolutions
For the majority of companies, their Articles permit board decisions to be made by way of a written resolution, which must usually be signed by every director eligible to vote on the particular decision (electronic signatures are permissible for these purposes under the Companies Act 2006). A written board resolution could provide a practical alternative to hosting a board meeting, particularly where a simple unanimous decision is required to be made by the board.
Companies House Filings
Companies House has closed its Belfast, Edinburgh and London offices (though Cardiff remains open to receive documents), as well as the telephone helpdesk, and suspended same-day services. Delays in processing paper forms are also to be expected.
However, most UK companies can use the Companies House WebFiling system to submit company filings electronically, such as the annual confirmation statement or updates regarding the directors or the company’s share capital. Companies can register for the service on the Companies House website, and a six-digit alphanumeric authentication code is required to make filings. If the authentication code has been lost, a new code can be requested from Companies House and is typically delivered within five working days (though the authentication code can only be delivered to the company’s registered office address).
The government has announced that UK companies can apply online for a three-month extension to file their annual accounts at Companies House. Applications will be approved automatically if the reasons cited relate to COVID-19. Detailed government guidance on the extension can be accessed here.
Stock Transfer Forms
HMRC has announced that it has relaxed its requirement for wet-ink stock transfer forms to be submitted for stamping and will not be accepting hard copy documents until further notice. HMRC will accept e-mails attaching an electronic copy of the stock transfer form, such as a scanned PDF or an electronically signed version. It is advisable to allow at least 20 working days for HMRC to complete stamping.
Remote working may create difficulties in obtaining wet-ink signatures, particularly if the signatory does not have ready access to the facilities to print or post the hard copy document. The general position under English law is that electronic signatures are valid in place of wet-ink, provided that there is an “intention to authenticate” the document and that any other execution formalities (contractual or statutory) have been satisfied.
There is no specific form of e-signature prescribed by English law; e-signatures can range from a signatory typing their name into the signature block, to the use of specialist e-signature platforms such as DocuSign.
Whilst deeds can also be validly executed electronically, the formalities related to their execution may pose further issues during COVID-19 (in particular, whether the signatory is an individual or a company).
An individual signatory to a deed must sign in the presence of a witness. The witness must be physically present during signing; a video link will not be sufficient.
An English company can execute a deed in one of the following ways:
Execution by two directors (or one director and the company secretary) on behalf of the company will alleviate the requirement for a witness. However, where there is only one signatory permitted or available, e.g. (e.g. in a sole director company), and that individual is unable to sign in the presence of a witness, consider whether it may be beneficial to appoint another authorised signatory under a power of attorney for the purposes of executing the relevant document.
Under established English case law, a witness must not be an existing party to the deed. In addition, although it is preferable as a matter of best practice for a spouse or adult family member not to act as a witness to a signature, a signature witnessed by such person is not prohibited under English law.
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1 Note that the Articles will govern the process for postponement, and assuming the Articles do not provide otherwise, there are no statutory minimum AGM notice requirements for postponed meetings, though 21 clear days’ notice is considered good practice.