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Directors should remain alert for ‘window of opportunity’ to hold AGM

02 Apr 2020 / Law Society Print

Directors should remain alert for ‘window of opportunity’ to hold AGM

Law Society President Michele O’Boyle has issued a bulletin to practitioners pointing out that “legal services” covers wide and complex areas of law.

Many practitioners provide legal services to large or small companies and the Law Society has now issued guidance for business continuity in these matters, given the public health crisis.

Managing company compliance requirements in a landscape of essential public health restrictions presents a challenge to these clients.

In that context, President Michele O’Boyle has set out guidance to assist solicitors advising companies on required meetings and electronic transactions, with the help of useful information from the Law Society Business Law Committee.

Planning for AGMs and board meetings

As the situation with Covid-19 continues to evolve, Irish companies may seek advice on public health guidelines and restrictions.

Practitioners advising Irish companies will be asked to advise them on how to implement and test their business continuity plans in relation to their upcoming AGMs and their regular board meetings.  

AGM notice

Companies should make every effort to ensure that shareholders and directors are informed of the company’s response to Covid-19 and make them aware of any decisions made on AGMs and board meetings.

It is important that companies keep themselves informed about the latest public health guidelines and communicate with stakeholders, as appropriate.

The health and safety of shareholders, directors and employees should be a priority.

Irish companies must provide at least 21 clear days’ notice for their AGM. Companies should consider the method of issuing notices and avoid sending notices from any affected areas by post or other means that require ‘at-risk’ physical handling at any stage of the delivery.

The AGM notice should be accompanied by additional information outlining steps to protect attendees and others from disease transmission.

Minimise attendance

The AGM notice should encourage shareholders to appoint a proxy or to attend remotely. In addition, the rules and procedures for electronic voting should be communicated clearly to shareholders.

Where an AGM notice has already been issued, an electronic follow-up communication should be sent to shareholders with the latest public health information and any related decisions by the board.

Given the rapidly evolving nature of the situation, the notice should also set out how the company will communicate further updates.

Proxies

Subject to the constitution of a company, shareholders are entitled to appoint a proxy to attend and vote at the AGM. The shareholders may grant proxies to a small number of persons such as independent directors who may attend in person and vote on their behalf at the meeting. Shareholders may also be able to vote by proxy in advance of the meeting.

A form of proxy should be included in the AGM notice which includes contingency provisions should the appointed proxy not be able to attend at short notice due to travel restrictions, illness or as a precautionary measure.

The appointment of proxies should minimise the number of persons physically in attendance at the meeting. In this scenario, shareholders may be invited to submit their questions in advance of the meeting.

Companies should be aware that the meeting must still satisfy the quorum requirement and be held at a physical location.

Electronic participation

Where provided for in a company’s constitution, shareholders may participate in the AGM by electronic means such as video-conferencing.

As part of their business continuity planning, companies should be testing their telecommunications systems.

Where the constitution does not provide for electronic participation, companies can still ensure that shareholders are involved in the process, for instance by live streaming online.

Dispense with or adjourn AGM

Irish companies must hold an AGM once in each year, and not more than 15 months may elapse between AGMs.

However, single-member companies and private limited companies may decide to dispense with holding a “physical” AGM while the Covid-19 pandemic continues. All shareholders entitled to attend and vote at the AGM may sign a written resolution dispensing with the requirement to hold the AGM.

A company’s constitution will usually allow the company to change the date and location of its AGM, if required. Many companies have already decided to adjourn their AGM until later.

Mindful

Irish companies which cannot dispense with their AGM must be mindful that no more than 15 months should elapse between AGMs.

Companies should also be ready to adapt their conference policies according to the latest public health guidance and restrictions.

A small window of opportunity to hold meetings may arise and companies should be familiar with the provisions of the Companies Act 2014 that may allow for a shorter notice period of seven days, subject to shareholder approval.

In any event, all decisions that affect the AGM should be communicated to shareholders. 

Quorate

If an AGM has been convened for an unavailable venue, then the requirement that the meeting must commence and be quorate in order to be adjourned must be navigated.

Most company constitutions give flexibility to the chairman to adjourn to another venue and time but this should be checked.

An arrangement must somehow be made to gain brief access in order for a quorum to meet and an adjournment to take place or to hold the meeting. If this is not possible then the meeting must be reconvened. 

Board meetings

Companies will also have to reconsider how directors convene their meetings. As a matter of good corporate governance, companies are advised to hold quarterly board meetings for the directors to discuss the business of the company.

In addition, boards are required to meet as necessary to authorise the company’s entry into various transactions.

Prudent 

It would be prudent for boards to hold their meetings using distance communications or by way of unanimous written resolutions.

The Companies Act 2014 facilitates the participation of directors in meetings by telephone, video or other electronic means.

It is also expressly provided for in some constitutions.

All participants must be able to hear and speak at such meetings.

A director taking part in the meeting shall be entitled to vote and will be counted in the quorum.

Understanding and communication are of fundamental importance.

Tax residence

Companies should also be cognisant of their tax residency when convening their board meetings.

Should the company wish to be Irish tax-resident for corporation tax purposes, board meetings should be held in Ireland as this is where the central management and control of the company is required to sit.

Solicitors should advise directors and company secretaries to ensure that they are aware of all statutory AGM and board meeting requirements and the options contained within the legislation that may be utilised to hold the AGM and board meetings in the current circumstances.

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