The Institute of Chartered Secretaries and Administrators (ICSA) has advised companies to remain proactive in their approach to governance, particularly during the challenges imposed by the global pandemic. We have therefore prepared some practical considerations and potential measures to be implemented to enable, as far as possible, companies to conduct “business as usual”.
1. Ensuring the board continues to hold regular meetings
Regular board meetings are key to ensuring the smooth operation of the business. It is usual for the constitutional documents of a company to allow for a board meeting to be held by conference via telephone or video link, provided that all present can hear and participate in the meeting. Effective chairing of such meetings is crucial – allow each director the opportunity to discuss items on the agenda and raise questions before a decision is put to a vote, ensure that the company secretary or other nominated individual takes complete and accurate minutes, and that a quorum is present at all times (especially if individuals lose internet connection!). The ICSA’s guidance note ‘Good practice for virtual board and committee meetings’ recommends that the chair invites questions after any presentation and ensures everyone has had a chance to speak at the end of each item on the agenda. They also suggest that a timed agenda may assist in managing such meetings.
After the meeting has been held, the chairman can sign the minutes electronically.
If such virtual meetings are not possible or practical, a company may choose to proceed with written director resolutions if the company’s articles of association allow this. Usually, such resolutions must be unanimous to be effectively passed. Such resolutions can be signed electronically – an email of consent is sufficient. Of course, the disadvantage with this approach is that there is an absence of discussion by the board, which can be an important aspect of decision-making.
2. Enabling shareholders to vote electronically
For private limited companies, written resolutions are commonplace. Three steps need to be taken when considering whether the company has the effective mechanisms in place:
- In order for the document to be sent to the shareholder by email, their express consent is required together with an email address for that purpose.
- The company may accept electronic signature of a written resolution, provided that the identity of the sender is either confirmed in a way specified by the company, or the sender identifies themselves and the company has no reason to doubt the authenticity of that statement.
- A document can be sent electronically to a company only if either (a) the company has expressly agreed to documents of that type being sent in that form and supplied an email address for that purpose OR (b) the company is deemed to have so agreed (i.e. where electronic contact details are included in the resolution or in the accompanying documents, unless a contrary instruction is given). If the company does not want to accept written resolutions by fax and/or email, this should be made clear in the explanatory notes to the written resolution.
The government guidelines prohibit public gatherings of two or more persons unless it is “essential for work purposes” and clearly this excludes general meetings.
If the company is required to hold an annual general meeting, the ICSA’s published guidance and supplementary guidance on holding AGMs and the impact of Covid-19 issued in March 2020 recommend that companies make it clear in the notice that shareholders are not allowed to attend in person (and this can be enforced by the chairman in accordance with his power to ensure the safety of the attendees) and instead should vote by proxy. A director or company secretary may of course be appointed as a proxy to negate the need for additional attendees to be present to meet the quorum requirements.
Other options are to delay convening the general meeting or, if notice of the meeting has already been issued and the articles of association permit, postpone the general meeting.
Companies may conduct an AGM with a combination of physical and electronic means, if their articles of association allow for this. However, consideration needs to be given to ensuring the instructions to shareholders are clear as to how they can attend and vote.
3. Filing accounts
Companies House has made some allowances for filing accounts during the Covid-19 pandemic; companies may make an application online to extend the period allowed for filing if it is clear that they will not be able to file the accounts on time as a result of Covid-19. The Registrar can provide a three-month extension for the company to file its accounts. However, such an application must be made before the filing deadline has passed; if the accounting reference period has already been changed, the company may not be eligible.
4. Keeping the company records in electronic format
It is important that companies maintain their statutory books. It is worth remembering that it is possible for the company registers to be kept in electronic form provided that they are capable of being reproduced in hard copy format. This is also the case for records of board meetings, as the minutes of the meeting can be signed electronically by the chairman and kept with the other company records.
This article does not constitute legal advice. Specific legal advice should be taken before acting on any of the issues covered.