Recent legislation introduced to relax corporate governance requirements, in the Corporate Insolvency and Governance Act 2020, has now been extended to 30 December 2020.
The Act introduced measures which will be helpful to many organisations with larger memberships which are having challenges in complying with the requirements in their governing documents relating to members’ meetings whilst also maintaining social distancing and complying with any local lockdown rules.
The measures include a more flexible framework for holding of members meetings, such as the ability to hold meetings electronically, even if this is not currently authorised under an organisation’s governing document.
Whilst these measures will be particularly helpful for organisations with AGMs due to take place, or which need to pass other members’ resolutions in the coming weeks, they also provide a helpful opportunity for other organisations to amend their governing documents so that members’ meetings can be held more flexibly in the future. This may prove useful if social distancing restrictions continue over a prolonged period and/or further lockdowns take place.
However the flexibility offered by the Act will only last until 30 December 2020 (unless further extended by the Government). This has been recently extended from 30 September.
So we recommend that companies, incorporated charities and mutual organisations which have wider memberships and constitutions which do not expressly allow for virtual GMs take this opportunity and hold a virtual GM before the end of December, to amend their constitutions to allow partial/wholly remote GMs in future.
What key governance changes have been made by the Act?
Corporate governance and members’ meetings
The Act creates a more flexible framework in which meetings can be held, overriding the express provisions in the organisation’s governing document. These measures will allow AGMs and other general meetings to be held validly, while the current restrictions on public gatherings remain in place, and in the expectation that social distancing measures will continue in some form for the foreseeable future.
These flexibilities are available to companies, CICs, CIOs and a range of mutual organisations – such as co-operative societies, community benefit societies, building societies, and friendly societies (but not organisations established by an Act of Parliament or Royal Charter).
The new rules provide the following:
An extended period to hold AGMs: where an organisation is currently required to hold an AGM (for example under its governing document) on a date falling between 26 March 2020 and 30 September 2020 (the “Relevant Period”), it will be able to hold that AGM validly at any point in that extended period, so allowing it to be delayed up to 30 September. Please note this deadline has not been extended.
- Virtual meetings: where a members’ meeting is held on or before 30 December 2020, companies (including charitable companies), CIOs and mutuals will enjoy the following additional flexibilities, even if the governing document does not allow for them:
- the meeting does not need to be held in a particular place, for example if the governing document states that it must be held in a particular physical location.
- the meeting may be held and any votes may be permitted to be cast by electronic means or any other means.
- the meeting may be held without any number of those participating in the meeting being together at the same place.
- a member does not have a right to attend the meeting in person, participate in the meeting other than by voting, or to vote by any particular means.
Organisations therefore will have considerable flexibility to decide how best to run their general meetings, in line with these measures above.
Organisations are still expected to make reasonable efforts to ensure their shareholders or members are provided with normal levels of engagement during a virtual meeting.
What are the governance implications of the new Act for your organisation?
If a company or incorporated charity has already held an AGM or other general meeting during lockdown, the Act can validate the meetings which have already taken place, even if not held in line with the governing document, and could also validate resolutions passed at those meetings. However, your organisation will have still needed to comply with rules governing members’ meetings which are not addressed by the Act, such as notice and quorum provisions.
If you need to hold an AGM or other general meeting this autumn it will be possible to take advantage of the greater flexibility offered by the measures outlined above, particularly the ability to hold the meeting virtually.
If you are not required to hold an AGM it is worth considering taking advantage of the temporary flexibility provided by the Act particularly if there are resolutions which you will need to put to your members to pass in the next few months.
Most importantly, even if your organisation does not propose to hold a general meeting this autumn it would be advisable to consider holding a general meeting virtually before 30 December 2020 to amend your governing document so that your organisation has the flexibility to facilitate partial or wholly virtual general meetings after December 2020, if your governing document does not already contain express provisions allowing this.
The measures introduced by the Act will not apply after 30 December 2020, unless these are extended by Government, and there is no guarantee that will happen.
What about unincorporated organisations?
AGMs or other general meetings for unincorporated organisations, such as charities structured as unincorporated members’ associations, are not covered by the Act and we strongly recommend that trustees of such organisations take legal advice on their own specific position should they wish to hold members’ meetings partially or wholly remotely in the coming weeks.
Potential solutions will vary based on each organisation’s individual circumstances and the current wording of its governing document.
How can Tozers help?
Our dedicated Charities and Company & Commercial teams will be on hand to help you with further guidance and support on how these changes could affect you, your organisation and its future. James Evans who leads our nationally-recognised team will be happy to help.