Board and Shareholder Meetings in the Time of Coronavirus

Updated as of 2 April 2020

Now, more than ever, it is critical that companies focus on good governance.  Reasoned, and recorded, decision making is important for 3 reasons:

  • to encourage directors and shareholders to formulate a clear (if flexible) strategy to try to steer their company through these very turbulent times;
  • to comply with the company’s Articles of Association and other legal obligations in relation to meetings and so ensure the decisions taken are valid; and
  • to demonstrate, if the worst does happen and the business looks like it might fail, that directors have acted properly and not in breach of their legal duties

Board meetings

Most companies use written resolutions for decision making, and these can be circulated and signed electronically in the usual way.

Where the directors want to hold a board meeting, this can usually be done remotely without needing any particular procedural requirements.  The way private companies can hold board meetings is very flexible.  For most companies, their Articles of Association will specifically state that meetings can be held by telephone conference or video link. 

It Articles are silent on the issue, remote meetings can be a valid way to make decisions, provided that any requirements in the Articles are followed (for example as regards notice, quorum).  It is best practice to get each director to consent to the remote meeting too.

If the Articles of Association prohibit remote meetings, consider whether they can be amended (with shareholder approval) to allow this, given the current problems getting directors in a room together. Amending is also recommended best practice if the Articles are silent on the issue.

If absolutely necessary, directors can make informal unanimous decisions, but if they do should take care to record any decision made, and get any decisions made in this way formalised (ratified) as soon as possible.  

Ensure the minutes of the meeting record how it took place, and how decisions were reached.  Minutes will still need to be circulated for approval.

Minutes and resolutions can be circulated on email and signed electronically.

Shareholder meetings

AGMs: there are no statutory requirements on private companies to hold annual general meetings (AGMs), so companies will only have to hold one if their Articles provide for this.  This would be unusual, as the Model Articles don’t have this requirement.  Usually, shareholders will only need to meet to make decisions on particular matters.  The Companies Act 2006 sets out a limited number of decisions that are for shareholders to make, either through ordinary or special resolution, such as changing the Articles of Association, appointing or removing directors or alterations to share capital.

A lot of companies however also have shareholder agreements in place which add to the areas where shareholder consent is required.

Helpfully, in the case of private companies most decisions can be made by passing written resolutions, so shareholder meetings are not required and written resolutions can be circulated and signed via email. It may however be that the shareholders want to hold a meeting to fully discuss issues.

If the company has the model Articles of Association then the answer is yes.  If the company has bespoke Articles, or has amended this provision in the Model Articles, then you need to check the position.  Ideally they would provide for virtual meetings.  If they don’t, then you would need to rely on the fact that there is no express legal requirements or prohibitions in relation to holding virtual meetings.

It would be rare, but it may be that the Articles don’t allow virtual meetings – this may be implied by wording suggesting the need for a physical meeting (for example requiring that the notice provide for the “place of the meeting”).

If this is the case, you will need to consider workarounds like holding the meeting at one of the shareholders’ house, with one of his or her family member(s) acting as proxy for the other shareholders in order to satisfy quorum requirements.  If they approve changing the Articles to allow for virtual meetings, then the rest of the decisions can be made by the shareholders in the way set out below.

  • the meeting will need to take place over video or telephone conference so attendees are “present” at the same time, this cannot be done in a series of emails;
  • check your Articles and any shareholder agreement for requirements on quorum and voting/majorities required for the particular decisions you need to make;
  • check the people you need to make the decisions will be available at the time you propose;
  • ensure you comply with notice requirements, and include all the necessary details: dial in number, internet address, password, access code etc;
  • ensure attendees will be able to, and know how they can, hear, speak and vote effectively at the meeting;
  • ensure proper minutes are taken to record proceedings, resolutions and forms are filed at Companies House and registers are updated. This should all be able to be done electronically.

 

For more guidance, and further information, visit our Coronavirus hub.