The necessities of conducting day-to-day business operations remotely are educating large swathes of the public in the use of virtual meeting platforms. In addition, the infrastructure underpinning virtual meetings is rapidly expanding and being adopted by both individuals and enterprises.
This shift to a more flexible working and meeting culture is unlikely to completely fall away once we emerge from the current pandemic; we expect to see more companies embracing hybrid or virtual annual general meetings on a go forward basis.
A hybrid AGM is a physical meeting with remote electronic participation. In comparison, a virtual AGM is solely held electronically with no physical component.
While purely virtual AGMs are not uncommon in the United States, they are relatively new elsewhere.
This article focuses on the legal and practical aspects of a virtual AGM in Bermuda (which apply equally to remote participation in a hybrid AGM).
There are two overarching hurdles to holding a virtual AGM: determining whether the company’s incorporating statute and constitutional documents permit it, and determining the practical aspects of doing so.
In the case of virtual AGMs, Bermuda’s Companies Act 1981 states that, unless a company’s byelaws specify otherwise, an AGM may be held electronically or by such other communication facilities as permit all participants to “communicate with each other simultaneously and instantaneously, and participation in such meeting shall constitute presence in person at such meeting”.
Unlike some other jurisdictions that specify that participants must be able to “speak to” or “hear” each other, Bermuda’s legislation uses the broader term “communicate”.
This allows companies greater flexibility in organising and running their virtual AGM — for example, it’s likely that a company may validly mute all participants as long as each may virtually “raise a hand” to be unmuted for a question or submit their questions via a chat function.
Similarly, in our experience, most company byelaws permit virtual AGMs conditional on the technology providing shareholders as a whole a reasonable opportunity to participate (including functionality that allows shareholders to hear, be heard, vote and ask questions of management).
In a virtual AGM, all the usual corporate governance requirements relating to quorum, notice periods, proxies, documents tabled and counting and announcing the results of the vote still apply and must be met.
Fortunately, the Companies Act provides that electronically participating in a virtual AGM constitutes presence in person at such meeting — foregoing any potential issues with electronic participants counting towards quorum.
Even for companies that have included provisions in their byelaws permitting them to hold virtual meetings, there may be other statutory or regulatory hurdles (applicable listing rules or guidance from proxy advisers) that prevent them from doing so.
Once a company establishes that it is permitted to hold a virtual AGM, it must ensure that it is well structured and orderly. Some key considerations are set out below.
Preparation is key. The company should consider all logistic, AGM facilitating technologies, security of electronic communications, and publish instructions on how to access the virtual AGM platform. The company may wish to use a virtual service provider that specialises in virtual AGMs to host the meeting and request that the service provider offer practice facilities or tutorials for less technically savvy shareholders.
Shareholders and the market should be put on notice as early as possible prior to the virtual AGM.
Notice and proxy materials should include: the link for any web-based services provided for the meeting; dial-in details for any telephone-based services, including toll-free or local call rate numbers etc.; the correct time zone and all access codes; clear advice on the technology and internet connectivity needed for full participation; all protocols/rules of procedure (e.g. poll voting); and encouragement to shareholders to submit electronic proxy votes as early as possible.
The company should implement secure authentication measures to identify attendees (e.g. unique password) and verify that a quorum is present, maintained and voting throughout the meeting.
Further, it should establish how questions will be fielded (e.g. pre-submitted or live via text or chat, time limits on questions or responses) to ensure that shareholders have a reasonable opportunity to participate in the virtual AGM and that there is adequate debate. The virtual nature of the meeting cannot be seen to muzzle shareholders, filter or exclude shareholder questions or otherwise jeopardise shareholders’ ability to put proposals to management and thereby render management less accountable to shareholders.
The company should also open the meeting 10 to 15 minutes prior to commencement to allow a prompt start as well as extra time to deal with any technology issues.
Finally, in order to ensure that the meeting runs smoothly, the chairman should only ask for points of dissent for non-contentious matters, have a script, keep discussions focused, curtail the length of meeting, deal with important agenda items first to maintain participants’ attention, and consider short comfort breaks for long meetings.