The COVID-19 pandemic continues to disrupt business as usual. Organizations must adapt to new realities to maintain the health and safety of their shareholders and the public, including when holding their annual general meetings.
This article provides guidance on how private companies, public companies and not-for-profits can safely comply with legislative requirements to hold an annual general meeting (“AGM”) during the COVID-19 pandemic.
Consent Resolutions in Lieu of AGM
Private companies, public companies and not-for-profits are not required to hold an AGM if every person entitled to vote at the AGM consents in writing to all of the matters required to be dealt with at the AGM. This is the simplest and most efficient option for private companies with few shareholders and not-for-profits with few members. However, the option is practically unavailable to public companies, private companies with many shareholders, and not-for-profits with many members.
If obtaining written consents from all shareholders or members is not practical, deferring the AGM may be a viable option. Generally, organizations are required by statute to hold AGMs within a certain number of months from their last AGM. Deferral may enable organizations to hold an in-person AGM at a later date when health guidelines allow for large gatherings. Alternatively, deferral may provide time for an organization to invest in and implement virtual or hybrid AGM technology.
In light of COVID-19, the BC Registrar is permitting BC companies to apply to defer an AGM by up to six months by emailing firstname.lastname@example.org. A company must notify its shareholders if a deferral is granted. There are no similar deferrals as a right available to federal corporations. Instead, federal corporations must apply for a court order to defer an AGM. However, in light of COVID-19, many courts are closed, so seeking court-ordered extensions is potentially impractical.
Notably, the BC Business Corporations Act requires BC companies to publish interim financial statements if an AGM is held more than 6 months after the end of the company’s previous financial year. In practice, this requirement may negate or shorten the deferral period available to BC companies that do not wish to incur the expense of preparing interim financial statements. For example, if a company’s financial year end is December 31, 2019, it would need to hold its AGM by June 30, 2020 to avoid the requirement to publish interim financial statements for the period beginning on January 1, 2020 and ending on a date that is after June 30, 2020.
In addition to the corporate statute timelines, public companies may be subject to additional AGM timing requirements imposed by their listing stock exchange rules. In light of COVID-19, however, the Toronto Stock Exchange and TSX Venture Exchange are permitting companies to hold an AGM at any time on or before December 31, 2020, provided the date of the AGM complies with applicable corporate legislation (including any deferrals obtained). Canadian Securities Exchange listed companies need only comply with the timeframes permitted under their applicable corporate statute.
The BC Societies Act requires BC societies to hold an AGM in every calendar year (except the year in which the society is incorporated), although the bylaws for some societies include a more restrictive requirement that the AGM be held not later than 15 months after the previous AGM . The Societies Act permits societies to apply to hold the AGM not later than March 31 of the following calendar year by submitting an online application. Currently, the application is only available between November 1 and December 31 of the calendar year. At each AGM, societies must produce financial statements covering a period ending not more than 6 months before the AGM.
It remains to be seen whether, in light of COVID-19, the BC Registrar will permit societies to apply for an extension to hold an AGM at a later date than required by the Societies Act or the society’s bylaws and relax the requirement to produce current financial statements. The BC Government has issued limited guidance suggesting that societies follow health authority guidelines relating to COVID-19 but also continue to comply with the requirements of the Societies Act and the society’s bylaws. The guidelines suggest deferring an AGM or holding a virtual AGM as potential means of complying with AGM requirements during the COVID-19 pandemic.
The Canada Not-for-profit Corporations Act (“NFPCA”) requires not-for-profit corporations to hold an AGM within 18 months of incorporation and thereafter not later than 15 months after the previous AGM. The NFPCA permits not-for-profit corporations to apply to defer an AGM by emailing IC.corporationscanada.IC@canada.ca. Applications must be made at least 30 days before the day on which notice calling the AGM is sent to members. The Director appointed under the NFPCA may grant a deferral if the Director reasonably believes that the members of the not-for-profit corporation will not be prejudiced as a result.
Virtual or Hybrid Meetings
Public companies and private companies and not-for-profits for whom consent resolutions are not practical should consider holding a virtual or hybrid AGM or strongly encourage voting through proxies.
A virtual AGM is an AGM held entirely through electronic communication facilities. In general, virtual AGMs are permitted if attendees can adequately communicate with one another and the organization’s constating documents allow for it. However, in light of COVID-19, the BC government is permitting BC companies and societies to hold a virtual AGM even if their constating documents do not allow for it. Such organizations will still be required to facilitate AGMs in a way that permits attendees to adequately communicate with one another. Federal corporations and not-for-profits whose by-laws do not permit virtual AGMs may consider amending their by-laws by director approval in order to facilitate a virtual AGM and seek shareholder approval to ratify the amendments at the AGM.
A hybrid AGM is an AGM where participation may be either in person or electronic, with the intent that relatively few shareholders or members gather in-person and the remainder participate virtually.
Both hybrid and electronic AGMs present potential issues with verifying identities of members, tabulating votes cast and allowing for participation by all members. Potential technical issues and troubleshooting options should be thought through and communicated well in advance of a virtual or hybrid AGM.
While not a complete solution to social distancing, companies holding hybrid or traditional AGMs may wish to include statements in their proxy materials strongly encouraging members to vote by mail in proxy and to not attend in person.
The Canadian Securities Administrators have issued guidance for public companies holding AGMs during the COVID-19 pandemic. If a public company has already announced its AGM and wishes to change from an in-person AGM format to a virtual or hybrid AGM, the company should:
- issue a press release announcing the new details;
- file the change on SEDAR;
- provide reasonable notice of the change to market participants, including the company’s transfer agent, intermediaries and proxy service providers; and
- provide clear directions on logistical details, including how shareholders can remotely access, participate in, and vote at such an AGM.
EKB is available to assist organizations in complying with legislative requirements to hold an AGM while maintaining the health and safety of shareholders and the public during the COVID-19 pandemic.