From the UK and the US to continental Europe, there have been swift law changes and new guidance issued to answer the dilemma between exercising the active ownership of shares and complying with public health imperatives posed by the coronavirus pandemic.
In Switzerland, the government has gone further and allowed companies to hold AGMs behind closed doors or “huis clos”.
Vincent Kaufman, CEO of governance advisory body Ethos, told RI that holding AGMs behind closed doors is regrettable:
“This will prevent any intervention of shareholders at the meeting. It is always an important time in the year where shareholders have direct access to the entire board and management of a company to convey potential concerns.”
He added: “In terms of vote, there is no significant impact as the large part of the votes are in any case delegated and voted by proxy.”
In Spain, which declared a state of emergency and imposed a lockdown on Saturday March 15, exclusively virtual AGMs are allowed in certain circumstances by a decree approved yesterday.
The special decree introduced a stimulus package, referred to as an “economic and social shield” to counter the effect of the coronavirus in the economy.
The measures include a sort of ‘poison pill’, under which the government can veto attempts to acquire more than 10% of shares of Spanish listed firms in strategic sectors by foreign investors. This is in addition to a ban on shorting of shares by the Spanish securities supervisors.
In the Netherlands, three listed companies have already postponed their AGMs. According to Eumedion, the corporate governance and stewardship forum, they are: Sligro Food Group, Esperite and the Arcona Property Fund.
Eumedion’s CEO, Rients Abma, told RI that Dutch company law does not allow virtual-only AGMs.
Reportedly, he said, more companies might follow suit and postpone their AGMs. This is also because some boards might want to reassess their announced dividend proposals and share buyback programmes, although these are unconfirmed reports.
Some of those Dutch companies that will go ahead with their annual meetings, such as KPN, AkzoNobel, ABN AMRO and probably ASML, might hold a “hybrid AGM”. This allows for “live voting” but shareholders will not be able to address the board or ask questions, according to Abma.
This is disappointing for Eumedion, which is encouraging other companies to follow the example of industrial group Kendrion, the only Dutch firm which will give shareholders attending the AGM virtually the option to raise questions during the meeting.
In the UK, the Chartered Governance Institute and law firm Slaughter and May issued guidance on AGMs and the impact of Covid-19.
Reflecting the UK law and regulatory framework, the guidance addresses the following options, which should be constantly reassessed given how fluid the situation is:
Adapt the basis on which you hold the AGM
Delay convening the AGM, if notice has not yet been issued
Postpone the AGM, if permitted under the articles of association
Adjourn the AGM
Conduct a hybrid AGM, if permitted under the articles of association.
Peter Swabey, Policy and Research Director at the Chartered Governance Institute, said in a statement:
“In my view, as a general rule, they [companies] cannot go very far wrong if they try to maximise the opportunity for shareholders to take part in the meeting. Encouraging proxy voting, the establishment of an online shareholder Q&A for the AGM and live streaming the AGM are all sensible measures to consider and companies may also choose to offer an opportunity for retail shareholders to engage with the board later in the year.”
The guidance is supported by the FRC, GC100, the Investment Association and the Quoted Companies Alliance, and reviewed by the Department for Business, Energy and Industrial Strategy.
Across the pond, the US Securities and Exchange Commission has also issued guidance. The SEC expects “virtual” or “hybrid” meetings to give clear directions as to how shareholders can remotely access, participate in, and vote at such meetings.
Regarding shareholder proposals, it expects “to provide shareholder proponents or their representatives with the ability to present their proposals through alternative means, such as by phone, during the 2020 proxy season.”
Otherwise, Rule 14a-8(h) requires proponents or their representatives to appear and present their proposals at the AGM.