Charities: holding AGMs and meetings during lockdown
It may be a little while until we are physically putting hands up to vote at AGMs. This is an update on the Corporate Insolvency and Governance Bill covering certain AGM and other arrangements during the covid-19 situation.
The Corporate Insolvency and Governance Bill has now been published. This paves the way for certain AGM/general meeting requirements to be temporarily relaxed given lockdown and social-distancing. This will apply to Scottish charitable (and other third sector) companies, ‘mutual’ societies and also extends to Scottish Charitable Incorporated Organisations. These are grouped together as ‘qualifying bodies’ in the Bill. It will be particularly useful for charities with large memberships, those considering holding virtual meetings or organisations with an older constitution. This note also recaps on the OSCR dimension and points for Scottish charities that are not covered by the Bill.
On Saturday 28 March, Business Secretary, Alok Sharma announced there would be legislation to create greater flexibility for holding AGMs. We now have the Bill and await it progressing through parliament. Perhaps it will be law in June. Government has also stated it intends for the rules to have retrospective effect back to 26 March, although organisations should take care in this regard.
Covid-19 AGM rules… what does the Bill say?
It will allow qualifying bodies to postpone AGMs up until the end of the September where they would otherwise have been required (due to their own constitution or the general law) to hold an AGM between 26 March and 30 September.
It will allow the board of directors/trustees to temporarily override any rules in their constitution that require a physical AGM/general meeting to be held. The Bill also expressly states that a meeting need not be held in any particular place (which might be referred to in the organisation’s constitution). The directors/trustees will be able to set out the mode for the meeting.
Irrespective of the terms of the constitution, electronic voting can be used.
The relaxation will be in place until the end of September, but could be extended up until 5 April 2021. In the case of SCIOs, it will be Scottish Government who will be able to extend the relaxed rules.
It will be permissible to count members joining remotely as part of the quorum even where the constitution says otherwise. Indeed, every member of the meeting could be joining from different locations under the relaxations.
Members will have no right to demand that they participate in the meeting (except by voting), vote in any particular way or attend in person.
The temporary rules will apply in a similar manner for other general meetings and not just for AGMs.
Engagement is the watchword
While the expected temporary rules will relax certain requirements for member meetings, the UK government has stressed that member engagement and opportunities to challenge and question remain fundamental.
With that, charities will need to think ahead to make sure virtual AGMs and the like do give proper chances for discussion, questions, debate and feedback. For example, giving members the ability to put forward questions in advance of the meeting and a chance for feedback to be properly considered. Communication and communication channels with members will be especially important during this period.
For some organisations they might wish to consider bringing forward AGMs or conducting business at a general meeting with the benefit of the relaxed requirements. That would be appropriate, subject to providing members with the proper chance to engage.
AGMs may take quite a different format from previous years. There will be practical peculiarities arising from social-distancing requirements and guidance. It is expected that qualifying bodies should make it clear to members how they can participate and vote on matters (including the use of proxy voting) in the present circumstances.
The OSCR dimension and Scottish entities not covered by the Bill
OSCR has provided covid-19 guidance and has set out (in that guidance and a helpful webinar) that it will act proportionately and with understanding. While acting proportionately, OSCR underlined that seeking to comply with constitutional and legislative requirements, having robust and transparent governance as well as documenting decisions remain important.
SCIOs are covered in the Bill. Although, it would be expected that (most) SCIOs should have sufficient flexibility to deal with temporary arrangements for meetings etc.
Scottish trusts and unincorporated associations should check if there are any barriers to how they hold meetings at the moment. Similarly, statutory corporations will wish to review their founding statute and any supporting regulations and bye-laws. Again, the opportunity for proper engagement in decision-making at trustee and member level will be key to any different arrangements for meetings this year.
Looking to the future
The UK government is encouraging organisations to consider whether or not there are updates that should be made to their articles of association/rules /constitution to provide greater flexibility for holding meetings in the future. The government supports organisations making such changes, but in doing so to ensure the opportunity for members to challenge and engage is preserved. All of this is part of ongoing good governance for organisations.
For any legal advice on charity law please contact firstname.lastname@example.org