Shareholder meetings, both the annual general meeting and other general meetings held throughout the year, are key as they offer the board of directors the chance to engage in meaningful dialogue with shareholders.
Annual general meetings (AGM) are not mandatory for private limited companies unless specific requirements are included in the company’s articles of association. Such businesses can make decisions by passing resolutions in writing; this allows shareholders to vote on a resolution without the need to attend a general meeting.
However, from time to time, directors may find that a decision needs to be made that has to be referred back to a shareholder meeting, for example, a decision to remove a director from office. It can also be useful to hold shareholder meetings to review company performance and make important decisions on the strategy and the direction of the business.
Shareholder meetings have historically been held in physical venues, with shareholders required to attend in person. However, the pandemic and adoption of new technologies have meant that many companies have now moved to hybrid shareholder meetings, where shareholders have the option to attend physically or remotely. This has led to improvements in shareholder engagement and allowed for a more diverse participation.
Virtual participation, nevertheless, has its drawbacks and challenges. For example, hybrid meetings require double resources, to host both a physical and virtual meeting at the same time. Ultimately, however, it will be up to your business to decide which approach is right for them at any given time.
Whatever the format of your general meeting, preparation and structure are both key to running a meaningful and efficient shareholder meeting. This month, we set out some tips for ensuring that your general meeting runs smoothly and results in a productive outcome.
Tip 1: Create a Meeting Agenda
A thorough agenda following a predetermined format is essential to ensure nothing is forgotten. It also provides a framework for discussions and can be used as a tool to move through the meeting with ease.
When creating an agenda, be realistic about what can be achieved in the meeting. While you may feel like you have to cram a year’s worth of content in one meeting, it is important to remember that you only have so much time to meet. As a result, it will be necessary to choose the most important talking points and build your meeting agenda from there. As part of the agenda, allocate time to cover any questions and concerns.
Suppose you are finding that you aren’t able to fit everything you need into one yearly shareholder meeting. In that case, you may need to re-evaluate your meeting agenda or host more frequent shareholder meetings.
Tip 2: Provide Adequate Notice of the Meeting
You must send shareholders, directors and any auditors a notice of the meeting and its agenda well in advance, usually at least fourteen days before the meeting. This should include the date, time and location of the meeting as well as the general nature of the business to be discussed and the full text of any special resolutions (that require at least 75% of the shareholders to agree to pass) to be discussed at the meeting.
Where a meeting is to be held virtually or is a hybrid meeting, this should include access to the meeting via an electronic platform, as well as instructions on how to ask questions and vote on issues.
Details on how to appoint and instruct a proxy - where someone can go along to the shareholder meeting in their place - should also be provided to shareholders well in advance of the deadline to complete a proxy form.
Tip 3: Be Aware of the Formalities
Your company’s articles of association should set out a prescribed process to be followed when convening a general meeting.
Many SME and start-up companies will have default model articles of association. These provide that a chairperson must be appointed to chair each shareholder meeting. There also needs to be a quorum – the minimum number of shareholders required to be present for decisions taken to be valid - which is also usually set out in a company’s articles of association. A meeting will need to be adjourned where a quorum is not present.
The articles of association will also provide guidance as to how voting should take place and will dictate who can demand a poll vote. A poll vote is different from a vote by a show of hands, where each shareholder gets one vote only. Voting via poll gives shareholders as many votes as they have voting shares.
Tip 4: Ensure that all Shareholders can Engage in the Business of the Meeting (Regardless of Format)
Shareholders should have the same participation rights in hybrid meetings as in physical meetings.
Details of how and when to submit questions before the meeting should be given in advance, with a clear timeframe explaining when and where questions should be sent and how questions will be answered.
If there is a virtual element to the meeting, your business should provide an online functionality for real-time questions to be submitted during the meeting.
Similarly, shareholders attending the meeting remotely should be able to vote electronically.
Tip 5 - Ensure that any Technology Used is Trustworthy
To ensure that general meetings with virtual elements are secure, companies should check that the technology used is trustworthy enough to ensure that meetings and voting procedures are secure, fair and transparent.
Also, make things as simple as possible for shareholders, and where possible, avoid the need for shareholders to download specific software to participate in the meeting. If specific software is needed, then provide clear information within the notice of the meeting on how to obtain such software.
Tip 6: Share Meeting Minutes After the Meeting Ends
Meeting minutes record the most important items that have been discussed during a meeting. They serve multiple purposes, including informing stakeholders who weren’t able to attend and providing context for future action items.
As a result, the minutes should be thorough enough to understand what was discussed in the meeting, how the voting took place and what the outcome of each issue or resolution was. It should also set out who was present at the meeting. At Witan Solicitors, we can offer expertise, guidance and support in all areas of company law including shareholder disputes. For advice and more information on preparing for a shareholder meeting or any other area of company law, get in touch with us via email.
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