This year has presented many unique challenges for businesses, including how they can validly hold meetings, whilst still adhering to lockdown and social distancing rules.
The UK Government recognised that social distancing and restricting movement and gatherings would make face-to-face meetings difficult and introduced the Corporate Insolvency and Governance Act 2020 (the Act) in June. The Act contains temporary measures which relax the rules on meetings and enables certain organisations to hold meetings in a way that is safe and best suited to their membership base.
What organisations are covered by the Act?
The following organisations are “qualifying bodies” under the Act:
- Public companies
- Private companies limited by shares
- Private companies limited by guarantee
- Charitable companies**
- Friendly Societies
- Charitable Incorporated Organisations (CIO)
- Societies registered under the Co-operative and Community Benefit Societies Act 2014
**Charitable trusts and unincorporated charities are not covered by the Act and should refer to our article:
What rules are relaxed?
The Act relaxes the rules on meetings as follows:
- Location: meetings do not need to be in a particular place, so any provisions in an organisation’s governing documents requiring meetings to be held at the registered office or another specified location can be disregarded.
- Attendees: those attending the meeting do not need to be together at the same place, which means that the people required to form a quorum can be in different places. A quorum is the minimum number of people that must be present for the meeting to be valid and is usually specified in the governing documents.
- Conduct: meetings can be held by any means, including electronically.
- Members’ rights: members do not have the right to attend a meeting in person or participate in the meeting. They still have the right to vote but cannot demand to vote in a particular way.
Warning: The Act has only made changes which enable meetings to be held virtually. All other meeting requirements such as notice, quorum, circulation of documents in advance etc will still need to be complied with to ensure that the meeting is validly held.
What sort of meetings can be held?
The Act allows meetings to be held in the following ways:
- Virtual: an entirely virtual meeting with all members logging into a virtual meeting platform or joining by telephone.
- Hybrid: a hybrid basis, with the chair and another member socially distanced at the registered office and everyone else attending virtually or by telephone (subject to any national or local social distancing/lockdown restrictions in place at that time).
- Closed: a closed meeting, where only people in attendance are the chair and such number of additional members as required to form a quorum. Those individuals could meet virtually or depending on the restrictions in place at the time, hold a socially distanced meeting in person. The chair would need to be appointed as proxy for the non-attending members to satisfy their right to vote.
Warning: The extent to which you use the flexibilities of the Act should be carefully considered, particularly if any important shareholder decisions are to be made at the meeting. The Act should not be used to exclude shareholders/members and purposefully deny them opportunity to raise their objections and concerns or challenge decisions being made.
What if the governing documents prohibit virtual meetings?
The Act overrides the governing documents of the organisations listed above so they can hold virtual meetings, even if there are express or implied provisions in their governing documents preventing them from doing so.
What records need to be kept?
The decision to proceed with a meeting using the provisions of the Act, including the reasons for the decision, should be fully documented. The minutes of the meeting should record that the meeting is being held in accordance with the Act and a record of who voted at the meeting and how those votes were cast should be retained.
If they are temporary measures, how long will these relaxations last?
The Act has retrospective effect and applies to any meetings held since 26 March 2020. The provisions were initially introduced until 30 September, but they have now been extended and will remain in force until 30 December (not 31 December) 2020. The Government can extend the provision again, but the Act does not currently allow for extensions beyond 5 April 2021.**Update: the provisions of the Act have now been extended until 31 March 2021**
What happens next?
Once the Act has expired, organisations will need to rely solely on the provisions of its governing documents. We would therefore recommend a review the governing documents now to see if virtual meetings can still be held after the Act expires. You can find more information on this in part one of the Virtual Meeting series“Meeting” Life After the Corporate Insolvency and Governance Act 2020.
The Virtual Meetings Series: