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2016 saw the first entirely electronic AGM held by
Jimmy Choo plc. Wholly electronic AGMs are likely to be increasingly attractive to companies given the perceived ease of access for members, and the lighter carbon footprint from not holding a physical meeting. Research carried out by ICSA: The Governance Institute in August 2016 revealed significant investor appetite for more electronic AGMs. Lexis®PSL Corporate, via its Market Tracker service will be tracking this trend during the 2017 AGM season to see if other companies are following suit.
Despite the perceived enthusiasm for virtual meetings, companies must take care not to alienate other, perhaps more traditional, shareholders. This will most particularly be the case if the company opts for wholly electronic meetings as opposed to a mixture of formats. Institutional investor organisations such as the Association of British Insurers and PIRC Ltd have indicated that it is important to retain meetings in person so as to ensure board responsiveness to shareholder concerns.
The first stage in any move toward electronic general meetings, especially if wholly electronic, should be to seek a special resolution to adopt new articles of association which specifically provide for the electronic format and also reassure shareholders as to the procedures to be followed. For examples of clauses that can be inserted into existing articles of association to provide for electronic general meetings see our Precedent: Articles—electronic general meetings. In addition to the core clauses set out in the Precedent, the articles should be carefully reviewed throughout to ensure that any references to the form, or ‘place’ of a general meeting are amended to refer, where the context requires it, to the ‘place or electronic platform…’ or such other wording as is necessary to capture the holding of physical and electronic meetings. Clauses where such minor amendment is required may include provisions relating to quorum, adjournment, chairman’s powers, method of voting and notice of a poll vote.
Many companies’ articles of association may already have broad wording that can be interpreted as providing for significant flexibility in the holding of general meetings. However, the fundamental consideration is the technical workability and security of the arrangements. In addition, some shareholders are likely to have serious concerns if they are not given a prior opportunity to vote on a resolution to allow electronic meetings, and have a clear set of constitutional arrangements providing for such an innovation.
Once the Jimmy Choo articles had been amended, the company and its technology partner Equiniti then developed an app for shareholder verification and voting, coupled with the use of telephones for participation. The app directly integrated with the AGM software to allow shareholders to submit questions and vote on the resolutions being put to the meeting. To access the app, a shareholder was required to enter a unique meeting code, provided in advance, at the same time as the Notice of AGM. These credentials were held on a secure, authentication server that connected to the meeting database via an online voting platform. A shareholder was not permitted to enter the ‘virtual meeting’ if their credentials could not be verified.
Points to consider:
- whether a solely electronic meeting is appropriate, or whether a hybrid version with a physical and electronic option is preferred
- a comprehensive review of the articles of association
- a special resolution to amend the articles where necessary (to ideally take place, for listed companies, at the AGM before the first intended electronic one), and
- a period of testing and trouble-shooting in relation to the technologies employed.