On 26 June 2020 the Corporate Insolvency and Governance Act 2020 (the “Act”) received the Royal Assent in response to the COVID-19 crisis to help companies struggling due to the pandemic. This major reform of the UK’s insolvency procedures has been in the pipeline since 2018, but the draft bill was fast-tracked through Parliament as a result of the current situation. The Act contains a number of temporary measures which benefit a much wider range of organisations by relaxing governance provisions for many organisations that are grappling with legal requirements relating to members’ meetings in the midst of social distancing practices and a number of permanent provisions that could be a great help to organisations which are facing serious financial hardship in the midst of this crisis. This blog focuses on the former provisions which include Companies House filings and Corporate Governance and shareholders’ meetings.
What key changes have been made by the Act?
Companies House filings
Companies are required by law to submit accounts and various other documents annually to Companies House. From 25 March 2020, businesses were able to apply for a 3-month extension at Companies House for filing their accounts.
The Act introduces further relaxations, including extended deadlines for certain filings, including (but not limited to) filing accounts, registering charges and filing notices of changes in directors and secretaries.
Most notably the deadline for filing a company’s confirmation statement was extended from its current 14 day deadline (from the end of the company’s review period) to 42 days. As this change is temporary it will not affect next year’s confirmation statement deadline where the end of the review period falls on 6 April 2021 or later.
Corporate Governance and members’/shareholders’ meetings
After much ambiguity for companies – whether they either required or can voluntarily opt to hold shareholders’ meetings during the lockdown, the Act creates a more flexible framework in which meetings can be held, notwithstanding the companies’ constitutional requirements. These procedures aim to allow AGMs and other general meetings to be validly held, while the current restrictions on public gatherings remain in place and in the context of the potential for social distancing measures to continue in some form indefinitely in the future.
a) Extended period to hold AGMs: where an organisation is currently required to hold an AGM (under statute or under its governing rules such as articles of associations or terms of reference) on a date falling between 26 March 2020 and 30 September 2020 (the “Relevant Period”), it will be able to hold that AGM validly at any point in that extended period.
This means that companies which have postponed their AGMs since 26 March 2020, or would like to postpone an upcoming AGM, will be given until the end of September 2020 to validly hold those meetings and, in doing so, they can take advantage of the additional flexibilities provided by the Act as to the manner in which meetings can be held.
b) Virtual meetings: where a members’ meeting is held during the Relevant Period (either because it has to be held or simply because an organisation chooses to hold a members’ meeting in that period), companies will be allowed the following flexibilities, even if their articles of association do not currently permit them:
• the meeting does not need to be held in a particular place;
• the meeting may be held and votes may be permitted to be casted by electronic means;
• the meeting can be held without nay number of those participating in the meeting being together at the same place;
• a member does not have a right to attend the meeting in person, participate in the meeting other than by voting, or to vote by any particular means
Therefore the Act provides the flexibility to companies to decide how best to run their AGMs . The framework for both postponement of AGMs and the flexible holding of members’ meetings could also be extended through secondary legislation so that it could continue to be available for any period up to 5 April 2021.
It is advisable that even if companies do not have any business that will need to be passed at a general meeting this year, to make use of those temporary provisions available until 30 September 2020 to amend their articles of association to ensure that they will be in position to facilitate remote attendance at general meetings after the end of the Relevant Period.
Please note that this information is only for information purposes and does not constitute legal advice. As this area of law is complex, we would suggest that you seek legal advice for your specific matter. Redfern Legal will be happy to assist you.