Virtual-only UK AGMs a “Retrograde Step”
Government urged to avoid weakening shareholder rights as other countries increasingly introduce hybrid or virtual meetings.
Industry experts have warned against the UK permitting virtual-only AGMs ahead of setting out details on rules later this year, while welcoming the potential of hybrid meetings.
Virtual-only meetings are an increasingly popular way of conducting meetings throughout the world. According to data from AGM provider Lumi Global, 44% of AGMs that it conducted in the first half of 2023 were virtual-only.
In the UK, default requirements currently dictate that companies must offer shareholders the option of attending in-person, while hybrid AGMs are also permitted. Virtual-only AGMs were permitted temporarily under the Corporate Insolvency and Governance Act introduced during Covid-19 which expired in April 2021, meaning they are not explicitly allowed in the UK today.
At an event hosted by the Investment Association last month, Andrew Death, Deputy Director of Corporate Reporting, Assurance and Governance at the UK Department for Business and Trade (DBT), said that the UK government will look to clarify the legality of virtual general meetings of companies, including AGMs, as part of the upcoming Audit and Corporate Governance Bill.
The DBT told ESG Investor in a statement that it has engaged with a range of interested stakeholders on the topic and “remains receptive to their views” going forward. A draft of the bill will be published later this year.
Secretary of State for Business and Trade Jonathan Reynolds said the UK would look to modernise the UK’s non-financial reporting framework in October. Such efforts would include examining the potential for updating shareholder communication in line with technology and clarifying the law in relation to virtual AGMs, according to the statement.
“Legislation facilitating virtual-only AGMs would be madness,” David Duffy, CEO and Co-founder of the Corporate Governance Institute, told ESG Investor. “It would be a retrograde step in terms of transparency and governance generally. Virtual-only is a bad move, but virtual as part of hybrid would be a good move.”
Significant shortfalls
AGMs being held behind closed doors or virtual-only has become increasingly prominent, with many firms maintaining restrictive approaches introduced during the Covid-19 pandemic.
Virtual AGMs are acknowledged to provide benefits, including reducing costs, improving efficiency and including a broader range of participants.
However, many also see significant drawbacks to virtual-only AGMs.
Helen Price, Director of Governance at the Church of England Pensions Board (CoEPB), listed some of the challenges that virtual AGMs present: cumbersome registration processes, restricted access to meetings, the opportunity to duck difficult questions and reduced opportunity for discussion.
“A shift to virtual-only AGMs is a big concern,” said Price. “The recent change to the listing rules has removed voting rights from shareholders, and a shift to virtual-only meetings risks further eroding those rights.”
When the CoEPB registered a question for a hybrid meeting online, the organisation was given the wrong login details. Even when this was fixed, the question was restricted to 100 characters and had to be shortened. Furthermore, CoEPB was provided with a prewritten answer and no opportunity to follow up.
CoEPB’s Director of Climate and Environment Laura Hillis also spoke publicly about not being able to pose climate-questions at global banking group HSBC’s AGM last May despite registering in advance.
Companies should detail how they seek to engage shareholders and the instances in which they would hold a virtual-only AGM, said Price.
The Corporate Governance Institute’s Duffy also noted technological issues that could emerge from virtual-only AGMs.
International movement
Ireland recently made pandemic-era rules allowing AGMs to be held on a fully virtual or hybrid basis permanent as part of a ‘pro-enterprise’ package of measures, joining the growing list of countries allowing virtual-only meetings.
“The UK could be tempted to consider such approach as part of similar proposals in recent months centred around weakening shareholder rights in the drive for economic growth,” warned Joe Dabrowski, Deputy Director of Policy at the Pensions and Lifetime Savings Association (PLSA). “A positive outcome for investors would be clarity that virtual AGMs are not permitted, or that at the very least, AGMs are held on a hybrid basis which still provides the option to attend in person.”
Dabrowski stated that recent engagement by the PLSA on its Stewardship and Voting guidelines 2025 highlighted strong views from investors on virtual-only AGMs. “Two large schemes, for example, have indicated in their voting policies that they are strongly opposed to virtual-only, and another has said hybrid AGMs are acceptable providing there is an option to attend in person,” he said.
Dabrowski added that AGMs being held on a virtual-only basis would “fundamentally erode the ability of shareholders to hold boards to account”, and therefore the PLSA would not support this as a “permanent arrangement”.
In a letter to European Commission President Ursula Van Der Leyen in October, the International Corporate Governance Network (ICGN) flagged investor concerns over some member states opting to make fully virtual AGMs or closed-doors AGMs permanent.
Last year, Italy adopted legislation allowing companies to conduct AGMs in a ‘closed door’ format, a move criticised by ICGN and many others. Separately, Ethos Foundation, a member of institutional investor network Shareholders for Change, called on Germany’s largest listed firms to stop holding virtual-only AGMs and to instead opt for a hybrid model in future.
Last week, German multinational tech company Siemens’ board narrowly lost a vote to allow the company to continue to hold virtual AGMs without the physical presence of investors. At the meeting, 71% of shareholders approved the change to the company’s rules, which would have permitted virtual AGMs to be held for the next two years, just short of the required 75% support.
The move had been criticised by some shareholders, as well as shareholder adviser ISS who called for a return to in-person AGMs and recommended shareholders vote against the proposals at Siemens.
Earlier this month, Australia’s government sided with the recommendations of an independent panel that they could continue holding hybrid meetings, including AGMs, and wholly virtual meetings where expressly permitted by a company’s constitution. The country will conduct another review of the effectiveness of the virtual meeting laws in five years.
The post Virtual-only UK AGMs a “Retrograde Step” appeared first on ESG Investor.