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Companies are having to consider how they hold meetings in order to make valid decisions while Covid-19 affects day to day activity and the regulations and measures which the Government has introduced in response to the situation. All types of companies have been affected, and we have been contacted by a variety of clients with questions about this issue.
The first thing that the directors will need to review is the company’s articles of association.
Under the EU Shareholders Rights Directive, which is incorporated into the Companies Act 2006, there is provision for meetings of shareholders to take place with participants who can communicate with each other but may not be physically present. The Model Articles will apply to most companies incorporated after the Companies Act 2006 came into force, and these Model Articles expressly allow for meetings to occur on this basis, for example by way of telephone or video call meeting. Companies incorporated under former legislation will most likely not have such explicit terms, although the general view is that provided all participants are able to communicate freely, such a meeting may well be valid. In any event, it is also important to check the relevant company’s articles of association to ensure that provisions concerning notice and quorum are complied with properly, and to establish whether the articles of association contain any other prohibitions or relevant requirements, and if any steps are required to ensure compliance with requirements.
Proxy voting might be a useful method to employ, and there are a number of options which can be given applied. For example, a member may appoint someone to vote on their behalf or they may direct them as to how to vote. In many cases, a meeting will often require that two people are actually present, with others participating by proxy or telephone/video call.
An alternative method for decision making is that companies can also pass resolutions of the members or directors in writing. For board meetings, resolutions in writing may often require unanimity. Shareholder resolutions can be passed in writing with sufficient support, i.e. a simple majority of over 50% for an ordinary resolution and 75% support for a special resolution, provided that a copy of a written resolution of the shareholders is sent to all of them and the auditors, if appointed.
Ultimately a decision which is unanimously supported may be valid, even if the specific procedural steps have not been followed exactly, under what is called the “Duomatic principle”.
Directors should remain conscious of their fiduciary duties, which will continue even if their employment has been placed on “furlough”. Any director so affected should continue to be included in any notices of directors meetings and other director communications although the extent to which the director may be able to participate may depend on whether the participation would breach the requirements of the furlough scheme.
If you have questions about corporate decision making or you wish to update your articles of association to introduce more express flexible arrangements for holding meetings and making decisions, please do not hesitate to contact David Morrison on 01689 887838 or email david.morrison@cwj.co.uk.