Coronavirus continues to impact on how Co‑operatives UK members can effectively govern their businesses. This guidance page has been developed to give some general governance advice in relation to the coronavirus pandemic.
Planning your AGM
This advice focuses particularly on the planning and staging of annual general meetings (AGMs), filing of annual returns and submission of application forms to the Financial Conduct Authority (FCA) now that the measures brought in by the Corporate Insolvency and Governance 2020 (CIGA2020) have ended.
Annual general meetings (AGMs)
The relaxations around general meetings and the mode of holding them brought into force by the Corporate Insolvency and Governance 2020 (CIGA2020) have now ended. This means that co-operatives, whose governance arrangements are still being impacted by the pandemic, will need to plan ahead about how AGMs or other general meetings will be held moving forward.
What are the options for co-ops?
Amending your co-op’s rules to enable meetings to be held online
Co-op’s considering holding meetings online, should check their governing documents to ensure that there is nothing that would prevent a meeting being held in this way. Many co-op's that have chosen to hold meetings online during the pandemic have seen this as an opportunity to review their meeting requirements to include online and/or hybrid meetings as a permanent part of their governance arrangements moving forward.
We have advised and assisted many co-ops to do this over the course of the last year and any co-op needing advice on how to do this can contact us for support.
Holding meetings online
Although the requirements around social distancing have been lifted, some co-ops, especially those with large memberships, may still be cautious about holding meetings in person, and choose to hold them online instead. Those co-operatives with governing documents that allow meetings to be held online should ensure members are kept up to date with regards plans for holding the AGM, either by sharing a proposed future date or advising members of plans to hold the AGM online.
Members still have the same rights and should be given opportunities to engage in the business and vote in other ways than in person. If an in-person AGM is held and members are asked not to attend, then opportunities should be provided prior, during or after the meeting for engagement and challenge and any questions asked should be responded to in advance in order to enable members to use their votes before the meeting.
If a co-operative decided to hold a general meeting online and its governing document is silent or specifically prohibits meetings from being held online, this would mean it was in breach of its governing document. Members can take action against a co-operative if a breach occurs. Co-operatives should seek to gain the consent of and/or consult with its members to limit the risk of a member taking action against the co-operative for breaching its governing document; or let your members know as soon as possible the reasons why you have decided to hold an online AGM even though your governing document does not provide for it and make sure you provide them with as many opportunities as possible for asking questions and attending online to limit the risk.
Although communication with members is key, now the restrictions around social distancing have been lifted, it may be difficult to justify why a co-operative is still holding meetings online when its governing document specifically prohibits this or is silent on such matters. Where this is the case, the co-operative should review its meeting requirements to consider whether online and/or hybrid meetings should be a permanent part of their governance arrangements moving forward.
For assistance with this contact us for support.
Note, the FCA has updated its guidance on this matter and now takes the view that where a society hasn't complied with its own rules for holding meetings it may be in the public interest for it to act if they see non-compliance.
Depending on whether it is safe to gather in person at the time of planning and holding your AGM, co-operatives may consider a hybrid meeting (where meetings permit both physical and virtual attendance). Again, co-operatives should check their governing documents to ensure that there is nothing to prevent a meeting to be held in this way and keep members up to date in the same way as if the meeting was being held wholly online.
The Co-operative and Community Benefit Societies Act 2014 and Companies Act 2006 DO NOT require co-ops registered under them to have an AGM. If a co-op is obligated to stage an AGM this is because it is a requirement of its governing document. If a co-op decided to postpone its AGM this would mean it was in breach of its governing document. Members can take action against a co-operative if a breach occurs.
Wherever possible, we advise holding AGMs using electronic means or where it is safe to meet in person, a hybrid AGM wherever possible and use proxies if you have the power to do so. If a co-operative does not have the power to use electronic means or appoint proxies then it could consider doing this anyway. The impact of a Rules breach to enable participation by electronic means is lower than the impact of cancelling an AGM completely. If a co-operative has a small number of members (less than 30) then the AGM agenda items could be agreed by written resolution or where it is safe to meet in person, by holding a hybrid AGM where a small number of members to achieve a quorum can be permitted to attend a physical location and other members can join online.
Often the agenda for an AGM is not time specific. For example, you can still run elections to the Board; minutes can be signed off at any point; application of surplus can wait to a later date. If a co-operative must re-appoint an auditor then this is probably more time specific, but can probably be delayed. Specifically in relation to societies, the annual accounts and returns do not have to be agreed by members; rather they need to be presented/confirmed by them. Annual accounts and returns can be filed with the FCA on time and then confirmed by the members at a later date. Companies that are eligible and cite issues around COVID-19 in their application can apply for a 3 month extension to file their accounts. Companies House has issued guidance here.
This is the current position as the forbearance measures put in place by the FCA to help societies during the Covid-19 restrictions come to an end. We are in contact with the FCA and will update this information when we are made aware of any changes:
"Societies can hold meetings virtually where this is not prevented by legislation or their rules. We welcome that we have seen lots of societies taking the opportunity to update their rules over the last year to better facilitate virtual meetings where possible. It remains the case that societies are expected to comply with any legislative requirement, or requirements under their own rules, for holding meetings. It may be in the public interest for us to act if we see non-compliance. This will be assessed on a case by case basis."
Annual returns and accounts
To enable businesses to manage their response to COVID-19 organisations registered as companies are able to apply for a three month extension for filing their accounts. The FCA has confirmed it will not take any action to follow-up on any delayed submission of annual returns and accounts by societies before 31 October 2021, where the delay is three months or less.
The FCA has confirmed that it will not extend this general forbearance after this date. However, it is mindful that some societies will still be experiencing delays in producing accounts and they intend to engage supportively to bring about submission.
"In April 2021 we explained that for annual returns due by 31 October 2021, we will not act to follow-up on delayed submission where that delay is 3 months or less. This remains the case. Though we are not extending this general forbearance further, we are mindful that some societies will still be experiencing delays in producing accounts and intend to engage supportively to bring about submission."
From 13 December 2021, the FCA will no longer offer forbearance for statutory declarations required by either mutuals legislation or on application forms. They will need to be fully completed on submission to the FCA.
This is particularly pertinent for those societies considering or who are currently undertaking an amendment of rules as the form for registering an amendment requires a statutory declaration to be completed.
All applications should be submitted online rather than via postal methods. Applications submitted either through the Mutuals Society Portal, or by email to [email protected] (or to [email protected] for annual returns) will be processed significantly quicker than applications submitted by post.
- Electronic signatures - The FCA will accept and encourages electronic signatures on all applications, including on accounts
- Statutory declaration - A number of application forms (such as rule amendments) require the completion of a statutory declaration. From the 13th December 2021, the FCA will no longer offer forbearance for statutory declarations required by either mutuals legislation or on application forms. They will need to be fully completed on submission to the FCA.
- Recording of charges - The FCA is currently asking that charge instruments are certified as a true copy. The FCA will accept electronic certification
Have a specific governance question?
Government has introduced new insolvency legislation to give businesses in distress more opportunities to turn things around. These apply to all co-operatives including registered societies.