Corporate Governance Provisions of The Corporate Insolvency and Governance Bill (“The Bill”)
June 3, 2020
The lockdown, and the continued social distancing restraints that are likely to remain in place for some time as we try to ease out of lockdown have, and continue to make it difficult, if not impossible, for companies and other bodies to hold physical meetings of members.
Most private companies are likely, for most purposes, to have been able to make use of the provisions relating to written resolutions in Chapter 2 of Part 13 to the Companies Act 2006 (“CA 2006”). However, a public company can only pass a resolution of its members by holding a general meeting (see s. 281 CA 2006), and the articles of association of other companies may require the holding of a physical meeting. Further, in respect of both private and public companies, members have the right to require directors to call a general meeting (see s. 303 CA 2006).
In addition, public companies are required to hold an AGM. Likewise certain private companies, when required to do so pursuant to statute or the terms of their constitution or articles of association.
Other bodies, such as mutual societies (e.g. registered branches of friendly societies) and charitable incorporated organisations may also be required to hold AGMs or other meetings, either by statute or their own constitution or rules.
Further, the constitution or rules of companies and other bodies may require that the AGM and other meetings of members should be held in a particular way, e.g. in person or at a particular place.
With a view to mitigating the difficulties that certain companies and other bodies are liable to have in holding meetings, and passing resolutions given the difficulties caused by the COVID-19 crisis, the lockdown and social distancing, the Bill contains temporary provisions at clause 35 and Schedule 14 that, for a temporary period:
- extend the time for the holding of AGMs, and relax the requirements for holding meetings by temporarily permitting meetings to be held otherwise than physically or at a particular place, where that would otherwise be required; and
- allow meetings to be held, and votes to be cast, by electronic or other means.
Further, the Bill, at clauses 36, 37 and 38, provides for a temporary extension of the period for public companies to file accounts, and for the Secretary of State, by regulations, to provide for an extension of time in respect of requirements to file other documents. This, again, is to mitigate the effects of the COVID-19 crisis given that many companies and other entities will have had difficulty, due to manpower and other resource issues, in complying with their statutory obligations.
The Bill is proposed to be fast tracked into law, and will have retrospective effect to the extent provided for, thereby seeking to mitigate difficulties that will have arisen as from 26 March 2020.
Company Meetings – Clause 35 and Schedule 14
The detail is in Schedule 14.
Paragraph 1 of Schedule 14 sets out a list of “qualifying bodies” to which the provisions apply. The list includes, amongst other entities, any company within the meaning of s. 1(1) CA 2006, registered or incorporated friendly societies, building societies, registered branches within the meaning of the Friendly Societies Act 1992, and charitable incorporated associations.
Paragraph 2 of Schedule 14 defines “relevant period”. In essence, this means the period which begins with 26 March 2020 and ends with 30 September 2020, but provision is made for these dates to be substituted with an earlier date, or a later date, with a backstop of 5 April 2021.
Formalities for meetings and resolutions
Paragraph 3 of Schedule 14 is expressed to apply to a “meeting” held within the “relevant period”, a “meeting” being defined for these purposes by sub-paragraph 3(2) as meaning a general meeting of a qualifying body, a meeting of any class of members of a qualifying body, or a meeting of delegates appointed by members of a qualifying body.
Paragraph 3 goes on to make provision as to the manner in which AGMs and other meetings may be held during the “relevant period”. It provides that:
- The meeting need not be held at any particular place.
- The meeting may be held, and any votes may be permitted to be cast, by electronic means or any other means.
- The meeting may be held without any number of those participating in the meeting being together at the same place.
- A member of the qualifying body does not have a right:
- (i). to attend the meeting in person,
- (ii). to participate in the meeting other than by voting, or
- (iii). to vote by particular means.
- The provisions of any enactment relating to “meetings” as so defined have effect subject to this paragraph.
Members will continue to have a right to vote by some means, but subject thereto, the requirements of the constitution or rules of the relevant “qualifying body”, and relevant statutory provisions, have effect subject to the above temporary provisions.
Paragraph 4 of Schedule 14 enables the relevant specified national authority, by regulations, to make further or connected provision, or to make provision about any notice or other document relating to a meeting held by a qualifying body during the relevant period. Thus, potentially, this power could be used to make further provision as required to disapply a qualifying body’s constitution or rules, or to disapply or modify any relevant legislative provision.
Extension of period for holding AGMs
Paragraph 5 of Schedule 14 applies where by reason of any provision a “qualifying body” is or was under a duty to hold a general meeting as its AGM during a period which ends during the “relevant period”, i.e. between 26 March 2020 and 30 September 2020, subject to extension or abridgement of that period as above.
In this case, the relevant provision is to be read as if it imposes (and had always imposed) a duty on the qualifying body to hold a general meeting as its AGM by the end of the “relevant period”, i.e. by 30 September 2020, subject to extension or abridgement as above.
Paragraph 6 of Schedule 14 confers a power to make regulations to extend the period within which a qualifying body must hold an AGM. This power is exercisable in relation to “qualifying bodies” with a requirement to hold an AGM during a period which overlaps with the “relevant period”. However, any such regulations cannot be used to extend the period holding AGM by more than 8 months.
Temporary extension of period for company to file accounts and reports – Clauses 36, 37 and 38
Clause 36 provides for a temporary extension to the period a public company is required to file accounts and reports with the registrar at Companies House. It applies where the period allowed for filing accounts and reports for a financial year would end after 25th of March 2020, and before “the relevant day”. For this purpose, the “relevant day” is whichever is the earlier 30 September 2020 and the last day of the period of 12 months immediately following the end of the relevant accounting reference period.
Clause 37 applies to companies and other entities, including Limited liability partnerships, limited partnerships, overseas companies, and unregistered companies who are required to file certain documents, or in respect of its assets an interested person wishes to register a charge with the registrar at Companies House (“Filing”).
In essence, the Secretary of State is able to make regulations to extend the time period which a company or other entity has to provide the registrar with Filings by providing for a “substituted period” to apply in place of the “existing period.” However, the “substituted period” must not exceed 42 days, in a case where the existing period is 21 days or fewer, and 12 months, in a case where the existing period is 3, 6, or 9 months. The power cannot be exercised where the existing period is 12 months. Further, a sunset provision (sub-section (8)) provides that the provision expires on 5 April 2021.
Clause 38 lists the provisions to which Clause 37 applies. These are:
a) 9 of the Limited Partnerships Act 1907 (registration of changes to a limited partnership);
b) 466 of the Companies Act 1985 (registration of alteration to a floating charge);
c) 9 of the Limited Liability Partnerships Act 2000 (notice of membership changes);
d) Regulation 80C of the European Public Limited-Liability Company Regulations 2004 (S.I. 2004/2326) (notice of change in members of the supervisory organ);
e) The following provisions of the CA 2006:
- S. 87 (notice of change of address of registered office); S.114 (notice of place where register of members is kept); S. 162 (notice of place where register of directors is kept); S. 167 (notice of change in directors etc);
- S. 275 (notice of place where register of secretaries is kept); section 276 (notice of change in secretaries etc);
- S. 442 (period allowed for filing accounts);
- S. 790M (register of people with significant control); S. 790N (notice of place where PSC register is kept); S. 790VA (notice of change to the PSC register); S. 853A(1) (confirmation statements);
- S. 859A (registration of charge);
- S. 859B (registration of charge contained in debentures);
- S. 859Q (notice of place where copies of instruments creating charges are kept).