Directors’ meetings and shareholders’ meetings – the “new normal”

With restrictions across the country continuing for the foreseeable future, and after many months of “working from home”, it has now become “normal” to conduct company business remotely.

While the vast majority of day-to-day business decisions can be made remotely, whether by email or video conference, there are certain matters which require a little more formality. In particular the directors of companies governed by the Companies Act 2006 (as well as other business structures) will need to give consideration to constitutional documents before taking formal board-level decisions or putting matters to their company’s shareholders.

The below does not only apply to companies but can also be useful for partners in a partnership, trustees in a charity and management in other business structures.

Can a board meeting be held remotely?

One of the first matters to consider is whether a remote meeting of the board of directors is actually allowed.

Directors should refer to their company’s articles of association to ensure that remote board meetings are not prohibited. This may well be an issue for older companies where the articles have not been updated since incorporation. If remote meetings are expressly prohibited, then the board meeting is likely to be invalid, as are any of the decisions made in that meeting.

The standard form articles of association (the Model Articles), which apply to companies incorporated after 1 October 2009 (unless bespoke articles have been adopted), do state that “it is irrelevant where any director is or how they communicate with each other”, provided that “they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting”.

When holding board meetings remotely, it is equally important to note that the other articles relating to board meetings continue to apply. Therefore, the minutes of the meeting should always record that: the meeting is quorate, due notice of the meeting had been given, conflicts of interests have been noted, voting on matters recorded and any other issues contained in the articles.

It may not always be necessary or practical for the directors to hold a formal meeting to approve matters. Provided all directors agree to the proposed actions, the Model Articles provide for such unanimous decisions to be in written form and signed by the directors.

When considering partnerships, there is no standard form governing document. Instead, reference should be made to the partnership agreement, if indeed such an agreement is in place.

General meetings of shareholders

Similar observations can be made for meetings of shareholders of private companies.

In most cases, shareholders have the right to attend, speak and vote at general meetings. Therefore, provided those rights are not violated (or the prospect of a remotely held general meeting is not prohibited by the articles), a remote general meeting of shareholders is very possible.

The Model Articles state that such meetings are allowed where shareholders are “in a position to communicate to all those attending the meeting…any information or opinions which that person has on the business of the meeting” and shareholder are “able to exercise the right to vote”.

Of course, consideration must also be given to the practicalities of holding general meetings remotely. Where there are a number of shareholders, a remote general meeting is likely to be unfeasible for a number of reasons (some of which also apply to remote board meetings) such as: IT and technological constraints, cyber security, or simply the ability to ensure that each shareholder can be clearly heard and their vote counted.  

Instead, it may be more appropriate for shareholder decisions to be made by way of the written resolution procedure, where each shareholder votes by signing a copy of the proposed resolution. It is an efficient way of approving matters without the extra time, costs and logistical difficulties associated with convening a general meeting.

We regularly advise clients to use the written resolution procedure on a wide variety of matters. Recent examples of our work include: changing the name of a company, issuing shares and approving the sale of shares or the purchase of another company.

Next Steps

Krishan Patel is a Solicitor in our Company Commercial practice. The above article should not be taken as legal advice on any issue. For further information please contact the Company Commercial team.