01 April 2020

Private limited companies whose articles of association (“Articles”) require them to hold an annual general meeting (“AGM”) should consider contingency plans in light of COVID-19.

Under the model articles prescribed by the Companies Act 2006 (“Model Articles”) private companies are not required to hold AGMs and the Model Articles do not contain any provisions relating to AGMs. In other words, if the Model Articles have been adopted by a private limited company, there will be no requirement to hold an AGM and those companies will not be affected by COVID-19 in that aspect. If, however, bespoke Articles have been adopted these will need to be reviewed in order to make unconventional arrangements this year in relation to the AGM.

Quorum

In order to hold a valid AGM (or indeed any general meeting of the shareholders) a quorum must be present. The Model Articles do not set a quorum for a general meeting and, therefore, the quorum is two qualifying persons (section 318 Companies Act 2006); unless there is only one member of the company in which case the quorum is one. If a quorum is not present within half an hour of the time at which the meeting was due to start or if during the meeting a quorum ceases to be present, the chair of the meeting must adjourn the meeting (see below for further comment on adjourning).

Arrangements

The Model Articles provide that directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak or vote at it. The Model Articles are drafted widely so that if a person is able to communicate to the others and vote then they shall be counted as attending and voting at the meeting. Article 37(4) of the Model Articles provides that members do not have to be in the same place as each other. Consequently, attendance by phone or video link is permitted and will allow the general meeting to go ahead.

Voting

How members will vote at the general meeting should be considered. The Model Articles prescribe that unless a poll is demanded, a resolution put to the vote of a general meeting must be decided on a show of hands. A show of hands will not be possible if attendance is by phone and a poll should be considered. The Model Articles specify that a poll may be demanded in advance of the general meeting before a show of hands. A poll may be demanded by any of the following: (i) the chair of the meeting; (ii) the directors; (iii) two or more persons having the right to vote on the resolution; or (iv) a person or persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution.

Proxies

Proxies will be vital in the event that a company’s Articles do not enable the AGM to be postponed or adjourned. If that is the case, shareholders should be encouraged to attend and vote by proxy. The Model Articles set out that shareholders may deliver proxy notices in respect of their shares but to be valid they must:

• state the name and address of the shareholder appointing the proxy;
• identify the person appointed to be that shareholder’s proxy and the general meeting in relation to which that person is appointed;
• be signed by or on behalf of the shareholder appointing the proxy, or be authenticated in such manner as the directors may determine; and
• be delivered to the company in accordance with the Articles and any instructions in the notice of the general meeting to which they relate.

Delaying or postponing

If the Articles require a company to hold an AGM, and notice has not yet been issued, the Company should consider delaying convening the AGM.

If a company has issued notice of its AGM, it could postpone it if its Articles permit it to do so. Any bespoke Articles will govern the process to be followed if postponing the AGM.

Adjourning

Article 41 of the Model Articles sets out the process for adjourning a general meeting. If there is not a quorum within half an hour of the time at which the meeting was due to start, the chair of the meeting must adjourn it. If a quorum is present, the chair of the meeting may adjourn the meeting if: (i) the meeting consents to an adjournment; (ii) an adjournment is necessary to protect the safety of any person attending the meeting; or (iii) to ensure that the business of the meeting is conducted in an orderly manner (Article 41(2)). The power given under the second scenario can be invoked in light of COVID-19.

When adjourning a meeting, the chair of the meeting must either specify the time and place to which it is adjourned or state that it is to continue at a time and place to be fixed by the directors, whilst having regard to any directions given by the meeting. If, as is likely, the continuation of an adjourned meeting is to take place more than 14 days after it was adjourned, the company must give at least 7 clear days’ notice of it to the same persons to whom notice of the company’s general meeting is required to be given and containing the same information such notice is required to contain.

In conclusion, any private limited company should carefully review its Articles in order to make such arrangements / modifications as it can to account for the fact that its AGM, or any other general meeting of its members, cannot proceed as usual this year.

Contacts

Emma Barclay Partner E: eba@bto.co.uk T: 0141 221 8012