FRC publishes AGM best practice report

The Financial Reporting Council (FRC) has published a report, AGMs: An Opportunity for Change, which reviews how listed companies conducted their AGMs this year against the backdrop of the Covid-19 pandemic. The report also sets out best practice guidance as to how listed companies could conduct their AGMs in 2021.

The FRC reviewed AGMs held between March and August 2020 and described the approaches adopted by companies by reference to three broad categories:

• “Closed” meetings with a quorum in attendance – All shareholders were requested to vote in advance of the AGM by proxy. There was either no opportunity for shareholders to ask questions before or during the meeting, or if shareholders were invited to ask questions, responses were posted on the company’s website following the AGM.
• Meetings with some shareholder engagement – All shareholders were requested to vote in advance of the AGM by proxy. Board members gave presentations on the day of the AGM, typically by webcast, and responded to a selection of questions submitted prior to the date of the AGM. Responses to other questions were posted on the company’s website.
• Meetings with more shareholder engagement – Shareholders could vote and ask questions at the AGM through an online platform and were also able to engage virtually with the board on the day of the AGM.

The FRC encourages companies to move away from the traditional form of AGM and to conduct AGMs in a way that enables the maximum number of shareholders to engage if they choose to do so. It recognises, however, that companies’ approaches will differ according to their size and shareholder base.

The report sets out a number of best practice recommendations as to how to conduct future AGMs including:

• Preparation – If a company is looking to use technology to facilitate engagement, consider what the articles of association permit, or whether they should be amended to permit alternative meeting arrangements such as hybrid meetings (that is, a meeting held at a physical place with the option for shareholders to participate online).
• Engagement – All shareholders should have the ability to hear from the board before voting on resolutions. Therefore it is best practice for companies to make every effort to ensure that shareholders can vote following presentations from the board.
• Questions – These should be facilitated in real-time at the meeting and there should be enough time for shareholders to submit questions ahead of the AGM. Transcripts of the Q&A should be uploaded to the company’s website following the AGM.

The FRC says that it intends to work with the government to consider what measures may be needed to ensure that AGMs in 2021 can take place either as a virtual meeting (that is, a meeting held exclusively online) or as a hybrid meeting. It also proposes to establish a stakeholder group comprising government, companies and investors to consider recommendations for legislative change in relation to AGMs.

The FRC’s Financial Reporting Lab has published a report on Video in corporate reporting, which looks at how companies currently use video in corporate reporting and shareholding meetings.