In the second part of this mini-series, we take a look at how you can continue to hold shareholder meetings, even if they are not ‘face-to-face’ traditional meetings.
If you missed part one in this series, you can read it here. Our thanks to Joel Hernandez, Neil McCarroll and Paul Martin from Mourant for their support and work on this series.
The impact of Coronavirus (Covid-19) has sparked uncertainty with completing complex cross-border transactions. With containment measures, including quarantine and travel restrictions prevalent, Jersey and Guernsey companies have been taking some practical measures to overcome barriers during these disrupted times.
How can I hold shareholder meetings if we cannot meet face-to-face?
In general, the guidance for board meetings described in part one of this series in relation to holding director meetings and passing written resolutions applies equally to shareholder meetings and written resolutions. Jersey law provides for a significant degree of flexibility, but the provisions of a company’s memorandum and articles of association/incorporation (the Constitutional Documents) will be crucial and must therefore be carefully checked to ensure compliance with any applicable restrictions.
In practice, a company with a small number of shareholders will rarely (if ever) hold a shareholder meeting as it is more administratively convenient for relevant decisions to be made by written resolution. But where it is necessary or desirable for such a company to hold a physical shareholder meeting in Jersey or Guernsey, subject to the Constitutional Documents, the ability for shareholders to appoint a local proxy or a corporate representative will be of assistance to those unable to travel, attend or vote.
For a company with a wide shareholder base (in particular, the large number of Jersey and Guernsey companies with shares listed on a major shareholder exchange), holding a physical meeting will, in most cases, remain necessary if a shareholder resolution is required. A high degree of shareholder attendance and interaction is normally to be actively encouraged at such meetings but the reverse is true whilst Covid-19 related travel and gathering restrictions remain in force: a responsible company should discourage and restrict physical attendance at a shareholder meeting and encourage shareholders to utilise proxy arrangements to cast their votes instead.
Three important consequences follow from the current state of affairs:
- with most of its shareholders prevented from attending, a company must take steps to ensure that any such shareholder meeting remains duly convened and validly held having regard to relevant provisions of the company’s Constitutional Documents and the law (market practice developed over the past year has involved holding a ‘closed meeting’ with the minimum quorum for the meeting satisfied through the attendance of directors or other senior management of the company, each such person being a shareholder or a proxy for a shareholder);
- if possible, alternative mechanisms for contemporaneous engagement between the board of directors and shareholders should be adopted in lieu of the opportunity for dialogue afforded by a physical meeting; and
- due consideration should be given to whether the immediately contemplated and/or any future meeting might be held wholly or partly using videoconferencing technology (i.e. ‘virtual’ meeting).
The Constitutional Documents of most companies will not adequately facilitate such arrangements in practice. Should a company wish to consider moving toward holding ‘virtual’ meetings, it will normally be necessary for it to make amendments to its Constitutional Documents and to invest in a robust technology platform that will permit shareholders to participate in the business of the meeting and to cast votes when resolutions are proposed.
Out of adversity comes opportunity
Covid-19 has created an unprecedented set of challenges globally, but by taking some simple practical measures, businesses with Jersey and Guernsey companies can mitigate the impact on their transactions.
This crisis presents opportunities for legislators and businesses to embrace technology to improve business continuity – perhaps by better enabling remote working and creating further efficiencies in transactions (eg even greater use of electronic data rooms and efficient e-signing platforms).
Indeed, some of the measures increasingly being adopted by the business community may catalyse the evolution of best working practices for the future.
Join us for the final part in this series, when we focus on signatures and executing documents.
Our thanks to Joel Hernandez, Partner, Neil McCarroll, Partner (Finance and Corporation, Jersey) and Paul Martin, Partner (Finance and Corporation, Jersey) from Mourant for their support and work on this series.
