The Corporate Insolvency and Governance Act 2020 (the ‘Act’) received Royal Asset on 25 June 2020, as part of the range of legislation introduced in response to the challenges posed by the COVID-19 pandemic.
The Act seeks to ease the burden on companies during the pandemic and to allow them to focus their efforts on continuing to operate. Most notably, the Act assists UK companies in holding shareholder meetings and filing documents with Companies House during these unprecedented times.
Social distancing and lockdown measures have proved a challenge for UK companies throughout the pandemic, particularly when it comes to holding shareholder meetings and annual general meetings. The Act includes various provisions to make it easier for companies to hold these meetings whilst complying with government guidance.
The provisions of the Act apply to meetings held between 26 March 2020 and 30 September 2020 (the ‘Relevant Period’). Further regulations may shorten the 30 September 2020 date or increase it, in increments of three months, to a latest date of 5 April 2021. The Act sets out a range of provisions concerning the facilitation of meetings during the Relevant Period. The Act states that:
- A meeting does not need to be held in a particular place;
- A meeting can be held electronically;
- A meeting can be held without any of the participating members being together in the same place;
- Votes can be cast by electronic or other means; and
- Persons attending the meeting have no right to attend in person or to participate in the meeting other than to vote by the prescribed form of voting.
The Act applies retrospectively and temporarily overrides the requirements of the Companies Act 2006 and a company’s articles of association. The effect of the Act is that proceedings at meetings held within the Relevant Period, which would ordinarily be in contravention of the provisions of a company’s articles of association, may be validated.
Annual General Meetings (AGMs)
An AGM which was required by law or by a company’s articles of association to take place within the Relevant Period can now be held at any time before 30 September 2020 (the end of the Relevant Period).
A company contemplating postponing its AGM should consider when any share allotment, pre-emption waivers and approvals that were provided at the previous AGM will expire.
The Department for Business, Energy and Industrial Strategy (the ‘BEIS’) and the Financial Reporting Council (the ‘FRC’) have issued joint guidance on best practice at AGMs in light of the temporary measures introduced by the Act (the ‘Guidance’). The Guidance highlights the importance of maintaining shareholder engagement before, during and after the AGM, given the restrictions on attendance and participation at the meetings.
There are various steps that a company could take to maintain shareholder engagement, such as live-streaming the AGM, allowing shareholders to submit questions in advance of the AGM, with responses posted on the company’s website, and allowing shareholders to submit their votes via a proxy (ideally the chairman of the AGM) to ensure that their vote is cast at the meeting.
Filings at Companies House
The Act permits the Secretary of State to temporarily extend statutory deadlines for various filings at Companies House.
Until 5 April 2021, companies will have:
- Nine months if they are public companies, or 12 months if they are private companies, after the end of their relevant accounting reference period to file their annual accounts and reports;
- 31 days to register a charge;
- 42 days from the end of their confirmation period to file their annual confirmation statement; and
- 42 days to submit certain notices relating to changes to the company (such as changes to directors) at Companies House.
This legislation is a welcome development; it will provide companies with clarity on how to hold meetings in the current climate and reassurance that those meetings which have already taken place may be ratified. The extended filing deadlines will ease the pressure on companies to arrange for filings to be made during a time when many employees are working from home.