Shareholder Meeting Procedure in a Virtual Age – What to Expect
This proxy season, many Canadian public companies will be conducting their annual shareholder meetings in a virtual-only format for the first time. Some issuers are permitted to hold virtual-only meetings by their governing corporate statute and constating documents, while others may be relying on governmental or court orders made in the context of the COVID-19 crisis to permit virtual-only meetings this year. If you are holding a virtual meeting for the first time and feel like you are venturing into the unknown, the following sets out certain considerations regarding the conduct of a virtual meeting and discusses how meeting rules and procedures may be applied in this context.
Quorum is required for any business of the meeting to be validly transacted. If you are holding a virtual meeting, you have presumably concluded that your by-laws and applicable corporate statute allow shareholders and proxyholders participating virtually to be counted as present for the purposes of establishing quorum. Quorum is often established simply by the presence of the chairperson or management as default proxyholders (i.e. where another individual was not indicated in the form of proxy) for holders of the required minimum percentage of shares. If your by-laws also require that a minimum number of persons be present, you should take steps to ensure that such minimum number of persons will be logged-in to the virtual meeting site at the start of the meeting as registered shareholders or duly appointed proxyholders so that the scrutineers can confirm that quorum is present and the meeting can proceed.
A chairperson is essential to any meeting as he or she will exercise procedural control. Where the chairperson will be presiding over a virtual meeting from a remote location (and perhaps alone), you may consider having a back-up chairperson available and prepared (with script) to step in if the chairperson with the first right to preside is prevented from participating at any time during the meeting for unforeseen reasons, including as a result of issues with the virtual meeting technology. Your by-laws may specify who is to serve as chairperson if the individual with the first right is unable or not present. Otherwise, you can prepare to have another individual serve as chairperson at the meeting.
As is often done for physical meetings, you may consider having one or more shareholders, who can be members of management or other employees, prepared to bring motions regarding business and procedural matters to ensure an efficient and seamless flow to the meeting. They will have to be registered shareholders or, if beneficial owners, have appointed themselves as proxyholder in advance of the meeting, to log-in as active participants in the virtual meeting. You should coordinate with your virtual meeting service provider to ensure those individuals will be able to effectively communicate the motions at the appropriate times, ideally through the audio webcast.
The seconding of motions is a practice that has developed to enhance the efficiency of a meeting (by avoiding the consideration of matters supported by only a single person). In a virtual meeting context in which the coordination of multiple audio participants may be cumbersome, consider whether seconding is a necessary procedural step for you (including if required under your by-laws) and whether it is in fact a practice that will benefit the meeting.
Recesses and Adjournments
In some ways, the conduct of a virtual meeting is more predictable and less subject to disruption than a physical meeting, particularly where the chairperson and management control the meeting audio. Nonetheless, the virtual element of the meeting brings some uncertainty, including as to the reliability of the virtual communication and voting platforms. As at a physical meeting, it will be the responsibility of the chairperson to ensure the proper conduct of the meeting in the face of unforeseen issues. You may want to be prepared with motions to recess or adjourn the meeting if there are issues with the communication or voting platforms, and consider what type or level of issue would compromise the proper conduct of the meeting such that the bringing of such a motion would be warranted. The chairperson or management will often hold sufficient votes by proxy to pass any such motion. Ideally a technician would be made available during the meeting to address any technical issues that shareholders or proxyholders participating in the meeting may have.
The virtual meeting should be conducted in a way which provides shareholders the same rights as they would have at a physical meeting, including the right to vote. You may want to take time at the meeting to explain the virtual voting procedure, even if it has already been explained in the management circular (or an insert mailed with the circular) and/or on the meeting website. You should also consider at what point during the meeting the online voting will formally be opened and closed, ensuring that a reasonable window to vote on all matters is provided to shareholders. If you intend to report the final vote tabulation at the meeting, be prepared for dead air if the business of the meeting and any discussion have concluded prior to receipt of the final report from the scrutineers (which may take longer to generate than at a physical meeting).
Participants’ Ability to Communicate
The ability to bring motions, ask questions and communicate with management at the meeting is another fundamental shareholder right that should be made available during the virtual meeting. As with voting, you should explain during the meeting how participants can communicate with the meeting, when questions will be answered, and set any applicable ground rules. You should also consider whether you want to permit guests to ask questions of management during and/or after the formal part of the meeting. We expect that most beneficial owners of shares will not have undertaken the process in advance of the meeting to duly appoint themselves as proxyholders and therefore will be participating in the meeting as guests.
Given the relatively recent and quick adoption of the virtual meeting platform in the context of the COVID-19 pandemic, many companies may not feel as prepared for this year’s meeting as compared to well-practiced in-person meetings of prior years. If you nonetheless apply the same basic rules and principles, and address any novel issue that arises with reasonableness and fairness, your meeting should be a success.
shareholder meeting virtual AGM