The impact of Covid-19
Further to our earlier article on electronic signatures, as companies come to terms with the impact of Covid-19 on the day to day practice of their business, we are advising our clients to consider conducting all business meetings remotely in an attempt to mitigate the risk of the virus spreading.
In this article, we look at whether remote, or electronic general meetings of shareholders, in private companies limited by shares are legally permissible.
When holding general meetings of a private company limited by shares, the company procedure is dictated by the Companies Act 2006 (“CA 2006”). Under section 301 of the CA 2006, any resolution of company shareholders is only legal and validly passed if the meeting is conducted in accordance with Part 13 of the CA 2006 and the company’s own articles of association.
Section 360A of the CA 2006 provides that nothing in Part 13 of the CA 2006 precludes the holding and conducting of a meeting by electronic means, when shareholders are able to speak and vote at the meeting. Therefore, the CA 2006 seems to permit convening a general meeting by electronic means, such as skype or other video link.
A company’s articles
However, companies must also consider their own articles of association, which may expressly or impliedly restrict the convening of a virtual or electronic meeting of shareholders.
Some companies will have adopted their articles some time ago, when virtual or electronic meetings were rarely considered or used. If this is the case, it is more likely that the articles will restrict the convening of an electronic general meeting.
For example, articles may refer to the need for shareholder to be “present in person” in order to vote, speak or attend a general meeting. This may suffice to imply that general meetings cannot be held by electronic means, because shareholders will not be “present in person” via skype or video link.
One practical solution is, of course, to postpone the general meeting until a face to face meeting can be arranged. However, this may not always be an economically viable option for companies, particularly as the UK outbreak shows no signs of abating.
Fortunately, it is possible to take steps to circumvent this issue. In order to ensure compliance, a company could disapply the provisions of their articles which expressly or impliedly prohibit convening electronic or virtual meetings. Alternatively, a company could amend their articles of association, specifically inserting a provision which permits electronic general meetings.
Here, at Berry Smith, we advise companies on their legal obligations and articles of association on a daily basis. If you need advice on holding a general meeting remotely, disapplying or amending your articles of association, or any aspects of company procedure, please contact Abbie Anthony on AAnthony@berrysmith.com or call 029 2034 5511 and ask for the Corporate team.