Meetings of shareholders are a foundation stone for good corporate governance: It is through this meeting that the company’s ultimate stakeholders exercise influence on the direction of the company. As a consequence of COVID-19 and social distancing, it may no longer be possible depending on the proposed location – to hold that meeting in person. In light of this, companies in most places need to consider the possibility of holding a virtual shareholder meetings.
Here we set out the purpose of shareholder meetings, the different possible formats for those meetings, and three tips for successfully organizing and running them.
The Purpose of Shareholder Meetings
Jurisdictional law, corporate by-laws and constitutional documents of a company set out the rules for shareholder meetings. In the United States, for the majority of companies, the Delaware General Corporation Law applies. In the United Kingdom it is the Companies Act 2006, in Canada, the Canada Corporations Business Act (for federally incorporated companies), and in Australia, the Corporations Act 2001.
The most common form of shareholders meeting is the ‘Annual General Meeting’, or ‘AGM’, where directors, officers/executives and shareholders meet for the purposes of:
- Appointing the board of directors;
- Agreeing to compensation and dividend payments;
- Selecting auditors;
- Discussing resolutions on particular matters submitted to the AGM;
- Allowing shareholders to ask questions of the board and management of the company.
Companies may also call for an ‘Extraordinary General Meeting’, or ‘EGM’, to consider serious or urgent matters that cannot wait until the next AGM. For example, in some jurisdictions, shareholders need to meet to determine whether to put the company into a bankruptcy, administration or liquidation process.
In-Person, Hybrid, or Virtual Shareholder Meetings
Instead of meeting in a physical space, a virtual shareholder meeting (or more appropriately ‘virtual only’ meeting), is conducted entirely online. In the case of a ‘hybrid meeting, companies hold a physical meeting but also give their shareholder the option to participate online. Most, but not all, jurisdictions permit virtual meetings (for example, the United Kingdom and US companies incorporated in Delaware).
Proponents of virtual or hybrid shareholder meetings argue that they facilitate increased participation by shareholders who would otherwise not be able to attend a meeting in person. Opponents argue that shareholder participation is less effective in an online-only format, and that their ability to question and engage with directors and management, is reduced. As an example of this vehement opposition, the New York City Comptroller has directed that New York City pension funds vote against directors who allow virtual shareholder meetings (though, presumably, this will be relaxed this year in light of COVID-19).
Below we look at three ways to ensure that the virtual shareholder meeting runs smoothly.
Tip One: Ensure that the Virtual Shareholder Meeting is Compliant
Even if the company is located in a jurisdiction that permits virtual or hybrid meetings, the constitutional documents of the company, or its bylaws, may still need amendment to allow for virtual meetings.
Organizers of the virtual shareholder meeting need to check that any rules applicable to exchange-traded stocks or securities are complied with: For example, the US Securities & Exchange Commission (SEC) has released guidance in the wake of COVID-19 about informing shareholders where an existing physical meeting is being turned into a virtual meeting. Similarly, the Singapore Stock Exchange (SGX) has also released AGM guidelines as well as financial assistance to help companies transition to alternate meeting formats.
Tip Two: Pick the Right Platform
You need to ensure that you have chosen the right remote platform for your virtual shareholder meeting. Matters to consider include:
- The platform should have the capability to record the meeting;
- It should allow for interaction through several mechanisms. If a hybrid meeting, this should include allowing for in-person, application-based, and phoned interaction;
- Identity verification. Anyone who can participate in the meeting needs to have their identity verified;
- Secure voting mechanisms. There needs to be some method of ensuring that only those who are eligible to vote, do so. For example, codes sent to participants in advance;
- Participation of other stakeholders. Consider whether to allow non-voting shareholders, employees of the company or other stakeholders to view/listen to the meeting.
Read our guide to choosing the right AGM platform for your organization.
Tip Three: Facilitate Robust Discussion and Questioning
Shareholders may hold the perception that virtual shareholder meetings allow manipulation of questions. Therefore, it is essential that organizers allot time for questions during the actual meeting (not simply submitted in advance).
A fair procedure must be set up to manage questions in case they are duplicates, inappropriate, or simply too many. In a hybrid meeting where there are several methods of participation. For example, the system should not prioritize in-person participants over remote participants.
In addition, shareholders should have a mechanism for talking to each other during the meeting (such as via private messages).
Conclusion
Virtual shareholder meetings are common sense – if not government-mandated, in light of COVID-19 social distancing. However companies should make sure to carry out their remote meetings on a platform that is secure and fully compliant.
ConveneAGM is an end-to-end AGM solution that offers companies the secure and compliant platform they need to run virtual shareholder meetings. ConveneAGM guarantees a seamless transition to virtual shareholder meetings and is trusted by 300+ organizations worldwide to hold their annual shareholder meetings.