FRC publishes guidance on running effective AGMs

Person holding smartphone with logo of Financial Reporting Council (FRC) on screen in front of website.

The Financial Reporting Council (FRC) has unveiled new guidance for listed companies outlining how they should plan and conduct their annual general meetings (AGMs).

This is the first time that the FRC has ever issued guidance on how UK companies should carry out their general meetings, and the council’s recommendations have been largely influenced by the ways in which workplaces have changed as a result of the global COVID-19 pandemic.

A public company’s AGM is meant to be a golden opportunity for company directors to update shareholders on all of the great achievements the company has made over the course of the last year. It enables shareholders to ask questions about a company’s financials, learn about business performance and vote on key company issues. More importantly, AGMs help companies to fulfil a number of legal obligations.

Traditionally, companies have held their general meetings in physical venues. But when the COVID-19 pandemic struck in 2020, a majority of public companies adopted a virtual or hybrid AGM model in which a large proportion of shareholders had to utilise technology in order to vote on issues remotely.

Unsurprisingly, some companies did a better job adopting these technologies than others — but when done effectively, remote AGMs have made big companies more agile and empowered shareholders with unprecedented flexibility.

That’s why the FRC intervened at the end of July with new guidance designed to help companies perform virtual AGMs that are fit for purpose and fully engage every shareholder.

“With this new guidance, we want to encourage companies to seize the opportunity to maximise shareholder engagement by embracing new technologies,” said Sir Jon Thompson, CEO of the FRC.

“We also recognise that there are many benefits of physical meetings, allowing for more effective in-person dialogue, so companies should think carefully about which approach is right for them and their shareholders.”

What are the FRC’s new guiding principles?

The FRC’s new guidance on how UK public companies should be performing their general meetings is underpinned by seven overarching principles.

To help you understand each principle, we’ll break down the FRC’s guidance and the ways in which company boards can adhere to the new recommendations.

Principle 1

The FRC’s first principle says that information disseminated before an AGM must offer clear instructions on how to attend the meeting and participate. This is to ensure all shareholders have an equal chance to participate.

These instructions would need to include details on how to access materials, how to appoint and use a proxy, rules on opt-ins and anything else that would be helpful.

Principle 2

The FRC’s second principle says that companies must ensure that it’s possible for shareholders to fully engage in every AGM — whether the meeting is performed in-person, virtually, or using a hybrid model which combines elements of both meeting types.

To fulfil this principle, the FRC recommends companies remind shareholders who’ve opted for e-communications of upcoming meetings at least one or two business days prior to the deadline for submitting votes.

It also recommends that shareholders dialling in remotely are given all the same rights of participation as those attending a physical meeting (to the point at which technology allows).

Principle 3

The FRC’s third principle states that boards must provide an update at their AGM on matters raised by stakeholder groups that are considered by the board to materially affect the company’s strategy, performance and culture.

Boards should be collecting issues raised or recommendations throughout the year, and use general meetings as an opportunity to report back on how the board has looked at said issues.

Principle 4

The FRC’s fourth principle says that companies should ensure the broadest access to AGMs is clear and equal for all shareholders. Whether attending virtually or in person, it states, that shareholders should have the opportunity to raise questions pertinent to the meeting agenda.

To achieve this, the FRC states companies have got to provide online functionality for real-time questions to be submitted during the meeting. Whoever’s chairing a general meeting should ensure that questions are taken from all of the available channels for submitting questions — and the FRC says it’s important for companies to explain how questions are grouped together.

Principle 5

The FRC’s fifth principle states shareholders should either be able to cast their vote in real-time or submit a voting instruction in advance via the appointment of a proxy (depending on the format of a meeting).

To make this possible, companies have got to ensure they’re using appropriate technology capable of informing shareholders what votes can be changed, and also prevent the need for shareholders to download specific software to view or participate in the meeting where possible.

If specific software or an app is required to take part in a general meeting, clear information on how to obtain such software or download the app should be specified within the notice of the meeting.

Principle 6

The FRC’s switch principle dictates companies should be as transparent as possible with shareholders in relation to matters discussed and raised by shareholders at the GM.

To achieve this, the FRC suggests companies create written answers or summaries to submitted questions — whether or not these questions were addressed on the day. If a recording is made, it should be made available to shareholders for a defined period after the meeting.

Companies should also make efforts to gather feedback from the GM and analyse any trends in views.

Principle 7

The FRC’s final principle states that effective and transparent shareholder engagement should not be limited to an annual event. Instead, companies must also make opportunities to update shareholders on company matters throughout the year — and make sure these updates are available to everyone in a number of formats.

Examples include the opportunity to attend investor relations days, capital markets days or similar events.

While it’s important to note these principles are guidance rather than a legal requirement, a large number of trade bodies have already praised the FRC’s set of recommendations for providing a viable way forward for AGMs in the 21st century.

“I am delighted to see the publication of this useful guidance from the FRC,” said Peter Swabey, Policy & Research Director at The Chartered Governance Institute UK & Ireland.

“The AGM has always been, and remains, a fundamental element of corporate governance and both the march of technology and the pandemic have seen us look at delivery of the AGM in new ways. It is very helpful for the FRC to have captured the views of so many constituencies on the ways in which the AGM can deliver most governance value.”

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About the author

Nicholas joined in 2018 to set up the Company Secretarial Department in the group’s company formation divisions. After establishing the department, he was a key stakeholder in the development of Linnear CoSec. Prior to joining the group, Nicholas worked in a variety of client-facing positions at an international provider of corporate services, caring for a diverse portfolio of companies. He is a Chartered Secretary and Governance Professional, and holds a bachelor's degree in Politics as well as a Masters in Corporate Governance.

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