The UK government will clarify as early as the summer a legal grey area over whether companies can hold online general meetings, in a move that investors have warned could undermine shareholders’ abilities to hold bosses to account.
The forthcoming audit and corporate governance bill will “clarify the legality” of virtual general meetings, including AGMs, while considering the interests of company members, officials told the Financial Times. The government hopes to put forward draft legislation before the Parliamentary summer recess.
It should help clear up a vexed question for large listed companies in the UK over whether they can do without the expense of in-person AGMs — and the often awkward questions from shareholders and annual showdowns from protesters that can come in their wake. HSBC is among those to have explored moving to an entirely online AGM.
Any move to encourage UK AGMs online would mirror a trend seen in other countries. Financial technology company Broadridge hosted 311 virtual-only AGMs in North America in 2019, increasing to 2,448 in 2024. They are also popular in large countries like Australia and South Africa, where shareholders often have to take a flight to attend an AGM in person.
Jimmy Choo, the luxury retailer, was the first big company in Britain to hold an entirely virtual annual general meeting in 2016. The Covid-19 pandemic accelerated the number of companies using digital techniques to allow shareholders to grill management during lockdowns.
Since then, many UK-listed companies have shifted to “hybrid” AGMs that can be attended either in person or online.
Only a handful are entirely online, reflecting the fact that many shareholders want to mingle directly with directors and hold them to account in person.
Research by law firm White & Case suggested that last year there were just four companies holding fully virtual AGMs in the UK: Clarksons, Tui (which has since delisted its shares in London), Aston Martin and Haleon.
Food producer group Bakkavor — which agreed to a £1.2bn takeover by its rival Greencore in April — will join that list with a virtual meeting set for this month.
The current legislation about shareholder meetings, which is ambiguous about whether AGMs can be fully virtual, dates back to 1948 and was most recently updated in 2006.
The Companies Act refers to a “place of meeting”, prompting disagreement among lawyers over whether that means a physical or metaphysical, online place.
Government officials said the legislation would seek to clarify that confusion, after which point companies would have to change their articles of association to allow for virtual-only AGMs, which shareholders would then vote upon.
One official said the business department was “receptive” to the idea of updating the Companies Act having engaged with a range of interested stakeholders. “The introduction of any changes will depend upon the legislative timetable,” they said.
The Investment Association, the trade body representing asset managers overseeing £9.1tn, said it approved of hybrid meetings but was concerned about virtual-only events.
The group said AGMs were the only time when a board is publicly accountable to all shareholders. “‘Virtual-only’ AGMs remove this accountability due to the remoteness of participants,” it said.
“It is harder for participants to identify the views of fellow participants in a virtual-only format, and to register agreement (or disagreement). Companies who adopt a ‘virtual-only’ approach may also risk giving the impression that they are attempting to filter questions or participation of shareholders and do not want to be subject to the questions of their shareholders.”
Marks and Spencer, once famous for its lavish AGMs, has settled on having a hybrid event after it faced a shareholder backlash against an entirely digital one in 2023.
At the time, the retail stalwart told investors still intent on travelling to the event that board members would not be available for interaction and refreshments would not be on offer. Since then, the company has come to accept that a small minority of vocal shareholders will want to attend in person.
Peter Parry, a member of the policy committee of the UK Shareholders Association — which represents retail investors — told the FT that some companies had been pushing for a long time to limit their physical AGMs.
“Companies will typically argue it’s quite expensive running an AGM, they don’t know how many people are coming, so they hire a large hall and then only 10 people might turn up,” he said. “They can try and bribe them by offering them sandwiches [ . . . ] It’s costing a lot of money, some people don’t turn up, so they say ‘what’s the point?”
Parry said that his organisation supported the greater use of hybrid meetings, which made it easier for engagement with shareholders that lived abroad or in far-flung corners of the country. But he warned against more companies going virtual-only.
“The concern is that the board can almost do what it wants, you can have sleight-of-hand when it comes to things like questions, making people submit questions beforehand and then lumping them together in groups . . . and the next thing you know they’ve put together a composite question which makes it easier for them to avoid the more challenging questions.”
One corporate lawyer said that the idea of going virtual-only could quickly gain critical mass. “There is a safety in numbers so if one of the big companies goes virtual, others will follow,” they said.
An industry figure said that “most” banks want to push towards virtual-only AGMs, saying some of the biggest banks were tired of having to lay on security to deal with protesters interrupting meetings.
In late 2020 the Financial Reporting Council issued a report into the way that virtual and hybrid AGMs had taken place as a result of the Covid pandemic.
The FRC said that the traditional approach to such meetings was a “straitjacket to progression” but said that any moves towards more high-tech meetings should only proceed with shareholders’ support to ensure the changes would not lead to “disenfranchisement”.
“The ability to engage directly with company directors, ‘see the whites of their eyes’, and understand the ‘mood of the room’ are all matters that are important to many and it is difficult to replicate such things in a virtual meeting,” the regulator said.
White & Case noted that hybrid AGMs could take different forms. For example AstraZeneca has used “studio conditions” in a physical building while also discouraging shareholders to attend. Some other companies such as BAE Systems and Rolls-Royce had held hybrid meetings which, similarly, encouraged shareholders to attend remotely.
Lucy Reeve, a corporate partner at the law firm Linklaters, forecast that the legislation would be a “catalyst” for companies to rethink their approach to online AGMs, adding that they would then also need to consider whether their individual articles of association need to be amended.
She predicted that larger companies would be the first to move online-only because some smaller companies might feel that holding a meeting online could be disproportionately expensive.
“We’re just a bit behind in embracing the tech. The law that governs shareholder meetings was written before anyone had dreamt up Zoom and, like a lot of things, the law takes time to catch up with the technology,” she said.
Additional reporting by Laura Onita in London
