Since August 2009, UK listed companies have been able to hold virtual shareholder meetings. However, it was not until June 2016 that a meeting was conducting using electronic means. This blog discusses the benefits of a virtual annual general meeting (AGM) and also considers why the method has not become more universally recognised in the UK.
Pros and cons of a virtual AGM
A virtual AGM will have an identical structure to a physical AGM but it will be carried out through a combination of tele-conferencing, webinar and electronic voting applications. By carrying out a virtual AGM there are instant cost advantages to the company, ie they would not need to hire a venue or arrange security. In addition to this, it is arguably easier for some shareholders in remote locations to participate in a virtual AGM than it is for them to attend in person.
However, it is clear that many companies are hesitant to conduct virtual AGMs. This could stem from a lack of confidence in the technology available. Should a virtual meeting fail, due to technology issues, an adjournment would be necessary and reconvening the meeting could be costly and result in the requirement for a physical AGM. This is potentially embarrassing for a company which was seeking to avoid a physical meeting of its shareholders in the first place.
Recently formed companies may see the benefit of utilising the technology now available in modern business, but for more established companies any shift towards virtual meetings could unsettle their entrenched shareholder base who may prefer more traditional meetings.
Many companies consider that the time and expense required to conduct a physical AGM is not justified because of very low attendance by shareholders. A virtual AGM is seen to be more accessible to the majority of shareholders which allows for increased shareholder engagement.
In order to ‘test the waters’ companies could adopt a staged approach. This would involve conducting a hybrid meeting, essentially a meeting that has a face to face element as well as a virtual element. Hybrid meetings would be an effective way of gauging how amenable shareholders are to the use of technology as, if the hybrid meeting was well received, this would make virtual meetings a little easier to implement.
In preparation of virtual AGMs
It is important that a company checks its articles of association before conducting a virtual AGM. It is unlikely that the articles will expressly prohibit the holding of meetings in entirely electronic form; however articles do typically require notice of an AGM to state the place of the meeting. This could mean that AGMs would have to be held in a physical place.
Best practice is to amend the company’s articles at the next (physical) meeting to ensure that they expressly permit virtual meetings. The following meeting can then be held virtually.
Shareholders must be able to both speak and vote at the meeting which will require the use of appropriate technology. It is important that the chair of the meeting is able to identify who is present. This is straightforward in a physical meeting; however it could be problematic in a virtual AGM if the participant is not visible.
It is recommended that each attendee at the meeting is given a unique username and password for use when joining the tele-conference; this adds an extra level of security to the meeting. It would also be helpful to provide a helpline number on the notice of the meeting for those shareholders that may encounter difficulties. The technology should be tested in advance to ensure that electronic votes can be counted and that it accommodates the specific requirements of the company.
Despite the meeting being conducted virtually, the usual requirements relating to quorum, notice periods and documents being on display still apply.
Jimmy Choo(ses) a virtual AGM
In June 2016, Jimmy Choo conducted the first virtual AGM in the UK. Jimmy Choo Plc’s AGM featured all the requirements of a physical AGM but in electronic form. Shareholders downloaded an app onto their smartphones which allowed them to login securely and start the meeting. The app linked with the tele-conferencing system to limit participation to genuine shareholders.
The virtual AGM was much better attended than Jimmy Choo’s first physical AGM in 2015. The company reported that the meeting had been well received and the technology available had lightened the burden whilst improving shareholder engagement.
The US has seen a substantial increase in virtual AGMs with a leading provider of shareholder meeting technology running 187 shareholder meetings in 2016, compared to just 28 in 2010.
In a recent survey of companies by ICSA, it was found that only 36% of respondents considered the current system of AGMs to be valuable to companies. A potential way to improve the value of AGMs to companies would be to move towards holding more virtual meetings. When questioned as to how the AGM could evolve in the future, most respondents thought that the AGM would become more interactive through the use of technology for voting and attendance.
So far in 2017, six companies have amended their articles of association to enable them to conduct virtual AGMs. Could we therefore see more companies following in Jimmy Choos’ footsteps?
This blog post was written by Elliot Gibson. For further information, please contact:
Sophie Brookes, partner, Corporate
T: 0161 836 7823
 ‘Companies split over value of AGMs‘ – ICSA survey June 2017