Are companies required to hold an annual general meeting?
The Annual General Meeting allows limited company and public limited company shareholders to participate in the decision-making process a right afforded to them by the Companies Act 2006. It has to normally be held within six months from the end of the company’s financial year. The occasion is attended by at least two qualifying members of the company, shareholders and proxies.
Covid-19
With the Covid-19 restrictions imposed by the Government for the movement of individuals and social and business gatherings, the question to consider carefully is should companies hold an Annual General Meeting this year?
Due to Covid 19, the Government will allow companies for a temporary period to suspend the requirement for shareholders personally to attend an Annual General Meeting. This will allow companies to use video conferencing to hold the meeting but note this temporary provision will cease at the end of September. Unless the Government extends this provision, the options below will have to be considered.
Companies Act 2006
The Companies Act does not require a private company to hold an Annual General Meeting. The important point to note is that it can be written into the articles of association that an Annual General Meeting must be held, in which case there is no option but to hold the Annual General Meeting. Companies should check the articles to be certain of the position. This is a common clause in the articles of companies incorporated some years ago. Companies can amend the articles of association to get around this obligation.
The position for public companies is different. They are all are still required to hold an Annual General Meeting. So, what can you as a public limited company do if you choose not to hold the Annual General Meeting? There are various options to consider.
The first option is postponing the Annual General Meeting. Companies should read their articles carefully before sending out the notice to call the Annual General Meeting. Be mindful that once an Annual General Meeting is organised it can only be rearranged if the company’s Articles of Association allows this. If you do decide to go ahead or rearrange the meeting, careful consideration should be given to the continuing Covid 19 social distancing advice given by the Government.
The second option is to consider adjourning the Annual General Meeting. This is only permitted if the company’s Articles of Association allow or the chairman decides to adjourn for health and safety reasons. To adjourn the Annual General Meeting, it actually has to be held and an ordinary resolution passed to adjourn. All shareholder will then have to be informed of the adjournment.
The third option is to consider if video conferencing can be used to hold the Annual General Meeting. Companies should check if this is permitted by the articles of association. If the articles of association do not allow this option then the company can amend the articles to ensure this virtual option is possible. This might be sensible in light of the challenging circumstance Covid 19 presents to the business world.
This article is for guidance only and companies are advised to take legal advice if considering any of these options. If you would like further information please contact us on 01455852028.
