Should we postpone or even cancel our annual general meeting (AGM)? Would there be any consequences? What if we can't submit our annual returns on time?
Coronavirus is increasingly impacting 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 - particularly around the planning and staging of annual general meetings (AGMs), filing of annual returns and submission of application forms to the Financial Conduct Authority (FCA).
Co-operatives UK has worked closely with the Treasury to ensure societies enjoy the same relaxation of rules around holding AGMs as other businesses. There are more details of the legislation changes here.
Annual general meetings (AGMs)
Government has announced new legislation relating to all general meetings including annual general meetings. Once the legislation is passed it will apply retrospectively from 26 March. The legislation applies to companies, societies and charitable incorporated organisations.
The legislation relaxes the requirements around general meetings by temporarily overriding certain elements of your Articles or Rules related to the mode of holding meetings. The legislation permits:
- The delay or postponement of general meetings until the end of September (this date is being kept under review and may be extended beyond September if social distancing is still in force)
- Meetings to be held in ways other than in person (for example online)
Co-operatives taking advantage of this legislation 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 virtually. 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 to 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.
Co-operatives deciding to delay their AGMs or breach their Articles or Rules by holding the meeting virtually before the legislation has been passed should weigh up the risks of doing so and make a judgement however this legislation should offer comfort to all co-operatives that in delaying their AGMs or holding them online they are ensuring the safety of its members and can use the draft legislation as a basis to plan.
Until legislation is passed the following guidance still applies and should be used when determining how best to proceed with holding your AGM:
Should we postpone or cancel our AGM? Or can we hold our AGM in a different way which engages our members while also safeguarding them from COVID-19?
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 Rules. 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. Note, the FCA states that it doesn't consider it in the public interest to take action if a breach occurs.
We advise holding AGMs using electronic means wherever possible; 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 than the impact of cancelling an AGM completely. Co-operatives is drawing up some best practice advice on holding AGMs electronically which will be shared soon. If a co-operative has a small number of members (less than 30) then the AGM agenda items could be agreed by written resolution.
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 House has issued guidance here.
Full statement from the FCA regarding AGMSs and COVID-19
"We are aware that some societies are considering a number of options, including postponing scheduled member meetings, such as Annual General Meetings (AGMs). Societies are concerned that this could lead to them breaching their own rules or legislative requirements.
"It is for societies to reach their own decision as to whether to go ahead with any planned meeting, taking into account any relevant Government guidance, their own individual circumstances and, where appropriate, legal advice. Societies should take reasonable steps to ensure they meet any obligations they are under as soon as reasonably practicable. Societies will want to consider alternative arrangements such as making use of video conferencing where permitted.
"The rules of an individual society govern the relationship between a society and its members. It is important members are afforded the ability to exercise their rights under the rules of a society. Societies may want to take their own advice to consider any risks arising from action taken by members as a result of a breach of their own rules. The FCA has no role to play in determining disputes over society rules.
"Where, following Government guidance, the postponement of a general meeting results in a breach of a legislative requirement, it may fall to the FCA to make a decision as registering authority as to what if any action we take. We do not consider it to be in the public interest for us to take action in this context where we can see that a society is taking steps to ensure they meet the legislative obligation as soon as reasonably practicable. Members of societies will, of course, retain the ability to take action in accordance with their rights under the rules of a society.
For those societies that have listed securities, they should continue to consider and comply with their obligations under MAR and the relevant FCA listing rules."
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 now confirmed it will not take any action against societies where returns due up until 30 June 2020 are delayed by up to three months. This position will be reviewed again in June 2020.
Read the full FCA statement on annual returns and accounts
"We are aware that some societies may experience difficulties submitting their annual returns and accounts to us. Societies have also raised with us the fact that Companies House has announced a three month extension to the filing deadline for companies, and ask whether we will do the same.
"Requirements to submit annual returns and accounts are contained in mutuals legislation. Our acceptance of electronic signatures on accounts may help in some circumstances. However, we recognise that some societies will still experience difficulties in submitting any required returns to us on time. Whilst we ask societies to take steps to submit their returns to us as soon as reasonably practicable, we have decided that we will not take any action where returns due up until 30 June 2020 are delayed by up to three months. We will review this position again in June 2020.
"We are aware HM Treasury and BEIS are also considering whether further action can be taken to address the difficulties faced by societies in meeting these and other legal obligations."
Rules around the submission of application forms have been slackened due to COVID-19. Following consulatation with the FCA we have produced new guidance.
Can we still send paper applications? Do we still require written signatures? Do rule amendments still require the full statutory declaration?
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 elecronic signature on all applications, including on accounts
- Statutory declaration - A number of application forms (such as rule amendments) require the completion of a statutory declaration. For the time being the FCA no longer require statutory declaration forms to be fully completed. The FCA does not require the form to be signed by a solicitor/commissioner for oaths/notary public or justice of the peace. However, the authority does ask that an officer/secretary of the society completes the first half of the form (as above, electronic signatures will be accepted)
- Recording of charges - The FCA is currently asking that charge instruments are certified as a true copy. The FCA will accept electronic certification
Further advice and guidance
The Department of Health and Social Care has issued information and advice for the public on the outbreak of coronavirus, including the current situation in the UK and information about the virus and its symptoms. This page will be updated at 2pm each day until further notice.
- The NHS has issued advice to the public on how to avoid the spread of infections such as coronavirus, together with symptoms to look out for and advice to people who have travelled to affected areas
- XpertHR has developed information for employers on infectious diseases, including a number of frequently asked questions relating to how employers should protect their business and workforce from the coronavirus
- Acas has published advice for employers and employees on handling coronavirus at work
- There is further guidance and information posters on the World Health Organisation website