Let’s Meet ‘Virtually’ – the legalities and practicalities | 5 key considerations
As a result of Covid19, many things that we took for granted have had to be re-thought. Among these are the way in which the need for shareholder and investor meetings to take place, can be met. With recent prohibitions on physical meetings taking place and continuing challenges, Merlys has been asked to advise on the legalities and practicalities of creating virtual meetings so that essential decisions which require shareholder approval can be made.
We have distilled our research and reporting into 5 key issues that must be considered before a virtual meeting can take place. Elaborated on below, these are: 1. Legal Capacity | 2. IT Considerations | 3: Proxies |4: Meeting Notices | 5. The Regulator…
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1. Legal Capability
Check your constitutional documents for your company or fund – be they the memorandum and articles of association, the trust deed, the prospectus or offering document – to ensure that you have the capacity to create the virtual meeting. Often it will be a question of whether virtual meetings are prohibited rather that whether they are specifically permitted.
You will also need to ensure who needs to be ‘present’ for the meeting to be quorate.
There may also be regulatory requirements that need to be considered.
2. IT Considerations
Do you have the technology to enable the virtual meeting to take place?
This may be a relatively simple matter when there are only a few participants, but this can be come considerably more complex if there are thousands of potential attendees. Does your chosen IT system have end to end encryption for security as well as real time voting capabilities?
How will you know that the attendees are genuine? One way to confirm this is for an attended to have their username as their shareholder number and a unique password contained in the meeting documentation to identify their shareholding – which is especially relevant for polls where the vote is based on the number of shares held.
Many shareholders do not want to attend meetings at all and the expect to be able to vote via a proxy. Checking the validity of proxy voting notices is as important as verifying investor attendees. Those shareholders who wish to vote by proxy may be able to return a scanned form by e-mail, whereas telephone votes can be verified by identity checks and verification.
As a general rule, proxy votes need to be validated by an independent party – a trustee or depository – depending on the fund structure. In the case of large meetings an independent vote-counting house should be employed.
4. Meeting Notices
Care must be taken to ensure that the notice informing shareholders and investors about the meeting meets the correct legal and regulatory requirements. Consideration will need to be given to the terms of the notice and how it is delivered to those who are entitled to attend and to vote.
5. The Regulator
Your regulator needs to be involved from the outset so that it can be asked to give any approvals and consents in time to allow the meeting to take place as scheduled. Matters such as the place and method of the meeting should be clear from the documentation submitted and they should be brought to its attention as early as possible.
Even after the present situation returns to some new normality many shareholders will remain reluctant to attend meetings in person. This may exacerbate existing issues with low turnout or poor levels of proxy voting. As a result, you may want to consider formally amending constitutional and offering documents (prospectuses) to expressly permit virtual shareholder meetings.This article is a general overview of the structure of an outsourcing project. It is not intended to offer legal advice.
How We Can Help
Merlys has extensive experience of the legalities and practicalities of arranging virtual meetings. If you would like to discuss any issue arising from this article, please call or email our expert Verena Charvet as below.
Verena Charvet MBA,
Solicitor and Senior Partner at Merlys
Contact/Call us at Merlys | +44(0) 20 8154 6031
Follow us: Merlys: https://www.linkedin.com/company/merlys/
This briefing note is intended to act as general guidance and is not intended to offer specific legal advice. Merlys is very happy to assist you with any aspect of the content in this article, as it relates to your business.