There has been a recent debate as to whether it is possible to have an entirely ‘virtual’ general meeting of shareholders, i.e. a meeting with no physical location held purely electronically.
The sceptics’ view is that the Companies Act 2006 (CA 2006) does not allow for wholly virtual meetings as a meeting notice must state the ‘place of meeting’, which cannot easily be read as anything other than a physical place.
It has been suggested that a company’s articles of association could be amended to define what is meant by ‘place of meeting’ (overcoming the obstacle of s.311 CA 2006), however, the term has to be given its ordinary meaning under the CA 2006 and so cannot be overridden by the articles of association.
S.360A CA 2006 is seen as a more general provision about the holding and conducting of meetings by electronic means, but that this needs to be read in light of the Shareholders Rights Directive 2007 (Directive) as anticipating and being in support of hybrid meetings rather than wholly virtual meetings.
There are also a number of practical issues which may make a wholly virtual meeting
- an Annual General Meeting (AGM) can be the only opportunity that shareholders have to meet and address the entire board, meaning that for some listed companies changing the articles of association to enable virtual meetings may prove impractical
- properly providing for members to participate in the meeting (e.g. those without internet access), the assessment of quorum and what security measures would be put in place to verify the identity of those taking part in the meeting
- the possible breakdown in technology; there would need to be detailed provisions within a company’s articles of association to govern issues such as the consequences of any IT failure.
The less restrictive view is that ‘place’ in s.311 CA 2006 could refer to a virtual location and that s.360A CA 2006 should be interpreted as overriding s.311 CA 2006 and the Directive as an enabling provision, not limiting companies to hybrid meetings only.
This was the view taken by Jimmy Choo PLC who held its first fully virtual AGM in 2016. Each shareholder was given a unique number and password to dial in and ask questions and to access the web browser to vote, ensuring at all times that the chair knew the participants of the meeting.
Companies might want to hold a virtual meeting because it is easier for shareholders to participate wherever they are based (as the Directive requires), and for the general reduction in time and resources that a company must invest in organising and holding the meeting.
Pending a clear authority on the validity of virtual only meetings, some companies may take the view that at this stage the safer course is to hold a ‘hybrid’ meeting and ensure that their articles of association and technological capabilities are amended to deal with any of the practical issues identified above.
The content of this article is for general information only. For further information, please contact a member of Birketts’ Corporate Finance Team.
This article is from the winter 2018 issue of Inside Out, Birketts commercial newsletter on current and upcoming legislation. To download the latest issue, please visit the newsletter section of our website. Law covered as at January 2018.
To keep up-to-date with the latest news, legal updates and seminar information, please register and select the areas that are of interest to you.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2018.