Emergency legislation will be brought forward “as soon as possible” to allow UK-listed companies to hold annual general meetings with shareholders remotely during the coronavirus lockdown, the government said on Friday.
Britain’s business ministry, together with the accounting watchdog the Financial Reporting Council (FRC), set out guidance on what companies should expect when the legislation is passed in a document preparing companies for the change.
“We are working on the detail, but we envisage providing companies with the ability to hold ‘closed’ meetings with a minimum number of people by way of telephone or other equivalent means of communication,” the document said.
“In some cases, companies will have the ability to over-ride their articles [of association] for a short period.” These are the written rules which define how a company must be run.
In late March, Business secretary Alok Sharma floated the proposed new legislation to address investor concerns that social distancing restrictions would make it difficult for companies to meet statutory obligations, including holding AGMS.
Meanwhile, the London Stock Exchange supported virtual meetings as investors were unable to attend in person because of the coronavirus pandemic.
Investment campaign group ShareAction last month called on the government to protect shareholder democracy during virtual AGMs and said the measures, while an “eminently sensible precaution”, should be a temporary solution.
In a letter to Sharma, policy manager Rachel Haworth said this could prevent many investors from attending meetings and holding companies to account. “A significant proportion of retail shareholders are older people who tend to be less comfortable with using the kind of technology required to host a digital AGM.”
“In addition, physical AGMs allow retail shareholders and the board a unique and unscripted opportunity to meet and have conversations in person.”
The letter stressed the importance of in-person meetings to a company’s sense of public accountability. Companies taking an inconsistent approach to AGMs could be detrimental to investors and other stakeholders, it said.