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Law360, London (April 17, 2020, 2:03 PM BST) -- The government promised on Friday to bring forward emergency legislation to allow companies to hold annual general meetings with shareholders remotely during the coronavirus lockdown.
Business Secretary Alok Sharma floated the proposed law in March, amid concerns that COVID-19 restrictions would make it difficult for companies to meet statutory obligations to hold meetings and file documents to Companies House, the government's registrar of businesses.
Parliament is in recess until April 21 to help combat the spread of the coronavirus. But the government's business ministry and the Financial Reporting Council set out guidance on Friday on what companies should expect when the legislation is passed.
"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 guidance said. "In some cases, companies will have the ability to over-ride their articles for a short period."
Shareholders' agreement and articles of association usually stipulate that two to five people are needed to make an annual meeting "quorate" or legally valid. Companies will now be allowed to temporarily form these electronically.
Shareholders will be able to vote only by proxy in the meetings. Virtual meetings in which members can participate are untested: the limited number of service providers, and the high number of companies that want to hold meetings within a short period of time, could present problems, according to the guidance.
The FRC and the government said they expect companies to respond to questions raised by shareholders sent in by electronic or other means. But companies will not be expected to make hard copies of AGM notices and other documents available.
They also recommend that "shareholder days" are held later in the year, after COVID-19 restrictions have been lifted, so they can have access to the board in a similar way to an AGM.
The guidance said that it is not possible simply to extend the deadline within which AGMs must be held. It points out that "important decisions need to be taken, and failure to do so in a timely fashion would have potential repercussions which we think companies and their shareholders would wish to avoid."
The government has already agreed to give businesses in Britain an extra three months to file their annual accounts to help them avoid penalties as they deal with the impact of the coronavirus outbreak.
There are also plans to suspend laws that make it illegal for a business to trade when it is insolvent, to give "breathing space" to companies hit by the crisis.
Amendments to wrongful trading rules will protect directors during the pandemic by allowing companies to continue buying supplies, such as energy, raw materials or broadband, while they attempt a rescue, the government said.
--Editing by Ed Harris.
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