Holding regular and meaningful meetings – be they of directors or shareholders – has always been of fundamental importance to running a successful business. In the current economic climate and in these challenging times for businesses, it is probably even more important to hold regular meetings. We’re here to help our clients and business leaders at this time, with the changes they will need to make to accommodate new ways of working. This article provides useful information for directors running virtual meetings.
Due to the current lockdown measures the new normal for the foreseeable future is likely to be meetings that are held on virtual platforms. Although the UK Government has promised a relaxation of some of the rules surrounding the holding of meetings, particularly AGMs, it is worth reminding ourselves about the existing rules in these areas and also best practice which may be followed.
It is now relatively common for board meetings to be held electronically (although it would be worth checking the Articles to make sure this type of meeting is not expressly prohibited) whether this is over the phone or via video conferencing or more recently service providers like Zoom, Skype or Microsoft Teams. Irrespective of whether the Articles do not expressly allow for a virtual meeting, if a board meeting is held by these means, it is generally accepted that such meeting will be valid provided a few simple formalities are complied with. These are:
- All directors entitled to receive notice of the meeting give their express consent to the meeting being held by such means
- The correct quorum is present and notice period complied with
- The arrangements are such that everyone can hear everyone else and vote in order to establish a clear consensus
- Minutes of any such meeting are circulated to each director for approval to ensure they are a correct record of the business transacted
In any event, companies will still have the option to make decisions by formal written resolution. This would require the signature of all the directors. However, in an economic climate where decisions may need to be taken quickly or discussed at length, a written resolution of the board may not be the most practical of solutions.
Although most day-to-day business decisions will be able to be taken by the board of directors, there will be some decisions which require a shareholder approval under company law – the removal of a director or an auditor are a couple of examples. For publicly listed companies, holding a valid virtual shareholders meeting can be problematic and has raised questions from institutional shareholder surrounding governance and accountability issues, but for private limited companies the option should be less problematic and offer a workable alternative to physical meetings.
Again, a quick check of the Articles to make sure there are no express provisions prohibiting the use of virtual meetings and, if not, the presumption will be that such meetings are valid irrespective of the fact there are no express provisions allowing for such meetings. Once more, any existing requirements regarding notice periods and quorum numbers should be adhered to and thereafter the key is making sure that all shareholders can freely participate and an accurate record of the meeting and the decisions taken should be made.
As with board meetings, shareholders of private companies are generally able to pass written resolutions, save for those exceptions where it cannot be used (i.e. for the removal of directors or auditors).
Turning to meetings of trustees of an employee ownership trust, the first place to start (regardless of whether the trustee is a corporate trustee or a group of individual trustees) is with the Trust Deed itself, to see whether there are any specific rule set out – things like the number of meetings to be held a year (quarterly, annually etc.) and how those meetings are to be conducted (appointment of chair, unanimous or majority voting etc.).
Clearly, to be effective a decision must be one which is within the trustees' powers to make but by and large, trustees are relatively free to regulate their proceedings as they see fit. The essential point is that all the trustees should be given an opportunity to put forward their views on the trust affairs in question and if this can be achieved through a telephone call, email exchange or other modern method of communication rather than a physical meeting then any resolution of the trustees is unlikely to be successfully challenged.
As highlighted recently in their good practice guidance note, ICSA, the chartered governance institute said the keys points to be borne in mind when holding virtual meetings were as follows:
- The choice of the right communication channel is vital
- Virtual meetings need to be well structured and avoid unnecessary complexity
- Preparation is key
- The Chair will need additional techniques to run an orderly meeting
- ‘Ground rules’ for participants should be circulated to all those joining the meeting
- Clear instructions on accessing the meeting system or app are essential
- Good boardroom practices are even more necessary for virtual meetings than for face to face
Each of these points should be reviewed regularly to make sure that existing practices remain fit for purpose.
In summary, holding well structured meetings in compliance with company law requirements is a pre-requisite for ensuring good corporate governance and driving business success. The current lockdown does not change that and the ability to use virtual platforms ensures that decision making can continue in an appropriate and dynamic manner.
We’re here to help
Our lawyers are here to help Scottish business leaders through lockdown and beyond, we understand as our businesses evolve through the Covid-19 pandemic, there will be new ways of working. If you require help with any of the things discussed in this article, please contact Ewan Regan for an initial pro-bono assessment of your business needs.