International AGM Landscape

The pandemic took the world by storm in 2020 impacting more than 180 jurisdictions and forcing organisations to rethink strategies for business continuity. While social distancing became common, remote working, enhanced digital capabilities, efficient processes and remote governance became high priority.

At Link Intime, we adopted a multi-pronged approach with considered decisions and speed of delivery, ensuring that we were at the forefront from ‘Day One’.

Virtual meetings

We received our first inquiry for a Virtual AGM in mid-April 2020 which gave us about four weeks to create a single-roof, secure and easy-to-use online product that shareholders across the globe could access from their homes. We partnered with a reputable organisation and our IT and Business Operations teams worked tirelessly to create an exclusive e-meeting video collaboration product that adhered to the new law instigated by the Government.

With the shift from physical to virtual meetings – we made the switch while considering client requirements. We built a feature-rich product capable of integration with our proprietary e-voting platform ‘InSta VOTE’ (as well as other similar platforms) enabling corporates to hold their shareholder and other meetings virtually. ‘InSta MEET’ our B2C video conferencing product for e-meetings – combines regulatory compliance, convenience, efficiency and safety.

‘InSta MEET’ hit the marketplace in May 2020 and was well received. We played a pivotal role in hand-holding several corporates which were not technologically savvy, through a series of product walkthrough sessions.

Our first ‘InSta MEET’ event was held on 29 June 2020. We have held over 345 seamless ‘InSta MEET’ events since then. Our dedicated team booked 51 InSta MEET events; 25 of them concurrently scheduled!

A review of General Meetings in 2020

During 2020 we analysed the voting results of our client General Meetings (GMs) in the UK and Ireland, to uncover trends and behaviour of the investment community compared to the same period in 2019.

• 1019 GMs analysed
• 9508 resolutions put to shareholder vote
• Voting choices and digital mechanisms

Electronic and paperless proxy voting have been growing in popularity and usage over the last few years. The move away from physical delivery accelerated by the pandemic has seen a significant increase in the use of digital mechanisms for general meetings compared to 2019.

• 52.96% of proxies lodged were in electronic form – a 34.75% increase from 2019
• 47.04% of proxies lodged were in paper form – a 22.5% decrease from 2019
• 78% of shares voted via electronic means – a 2.63% increase from 2019
• 22% of shares voted via paper – an 8.33% decrease from 2019

Voting volumes

It is pleasing to note that the average amount of issued capital being voted at meetings is also rising and may reflect efforts by companies to make voting easier using multiple voting channels, as well as the desire to engage with shareholders.

On average, 63.87% of share capital was voted for each resolution – a 27.51% increase from 2019.

However, there was a drop in the number of shareholders submitting a proxy appointment which may reflect general concerns during the pandemic particularly about using paper voting and posting items when the lockdown was implemented.

Only 5.19% of registered shareholders exercised their voting rights via proxy appointments compared to 6.16% in 2019.

Engagement and participation

Social distancing measures have meant that the “standard AGM” was largely abandoned in 2020. Many companies have held their shareholder meetings behind closed doors and the measures contained in the Corporate Insolvency and Governance Bill 2020 have allowed companies to hold GMs virtually regardless of legal or Articles of Association stipulation - this temporary provision will remain in place until 30 March 2021.

An increasing number of companies have utilised the hybrid meeting model where they already have regulations in place, with many more seeking approval for changes to Articles of Association. In 2020, 16 FTSE 100 companies had Article changes approved by shareholders that include provisions for hybrid meetings to be held. The Article changes have also included changes to clarify share forfeiture provisions and flexibility around electronic dividend payments.

During the year, we supported 26 separate hybrid meeting events in the UK where companies have used existing authorities or relied on the measures within the Corporate Insolvency and Governance Bill 2020. Most of these meetings occurred in the final half of the calendar year. However, during December 2020, almost double the number of companies that held a fully hybrid meeting made positive enquiries about holding a hybrid meeting in 2021, with these enquiries continuing in 2021.

A look ahead to 2021

Support for the hybrid model generally is gathering pace with 81% of retail shareholders recently surveyed in favour of the use of hybrid. The benefits for issuers have become clearer and the technology that supports delivery is well established globally.

The 2021 AGM season will present challenges in the UK given the uncertainty around legislative change required to side-step companies’ articles. Ireland however has emergency measures in place until 9 June 2021 meaning that most company AGMs can benefit from the additional measures. The challenge for any issuer using the existing arrangements will be to consider extending shareholder participation rights via digital means rather than holding closed door meetings; something that investors and regulators have voiced concern about.

The global pandemic also led to a temporary change in the law in Germany regarding convening and holding annual general meetings (AGMs), which brought changes to AGMs that had not been experienced in the previous 30 years. With a law that passed in March 2020, the German legislator created the temporary possibility to hold not just AGMs, but also representative meetings, general meetings or similar, virtually, without the physical presence of shareholders on site. More than 95% of our clients made use of this option in 2020. A few small companies with very few shareholders on site remained with a physical AGM - often with special permission from the local district administration department.

In addition, the ARUG II (Act Implementing the Second Shareholders' Rights Directive) came into force on 1 January 2020, which then led to a complete reorganisation of AGM and also the registration, voting and confirmation procedures on 3 September 2020 when EU Regulation 1212/2018 came into force.

Overview of the main changes in the law

The most significant and probably most striking points of change:

• The AGM is held without the shareholders’ physical presence. Only the company's proxy is present. Voting is also possible by electronic postal vote or as an online vote.
• The right to propose motions is largely suspended.
• The statutory right to ask questions has been replaced by an opportunity to ask questions. The answering of questions is at the discretion of the board. The company is further relieved by the fact that the board can limit the right to hand in questions two days before the AGM. Questions about the board's presentation at the AGM are not possible.
• There is no longer a need printed invitations, but a website with all relevant information on the AGM such as the agenda, registration requirements, etc must be provided for shareholders. The website will become the central information medium.
• Banks in the EU must forward the information to shareholders.
• Shareholders have a right to confirmation of their votes and execution of votes.

Further legal facilitation

• If, in principle, the AGM of public limited companies had to take place within eight months after the end of the financial year, the legislator grants companies a further four months to hold the AGM (i.e. within twelve months after the balance sheet date).
• In addition, the legislator has adopted shortened deadlines for convening the AGM. Accordingly, the AGM can be convened 21 days in advance instead of the previous 36 days. This contraction, coupled with the resulting significantly shorter registration period, is not desirable from the shareholders' point of view.

Safe conduct of meetings despite pandemic - criticism voiced in isolated cases

The facilitation of the law offered the companies the possibility to hold the AGM safely despite the prevailing situation. Criticism of the law came from the two large shareholder protection associations, SdK - Schutzgemeinschaft der Kapitalanleger e.V. and DSW - Deutsche Schutzvereinigung für Wertpapierbesitz e.V. The criticism referred to the significant restriction of shareholder rights in the 2020 season. This quite justified criticism was partially adopted in the extension of the law for the 2021 season.

Overall, however, the virtual AGM also brought a record number of votes represented at the AGM, just under 70% of the average presence in the DAX 30.

Two clear trends that could be observed among clients

1. Postal voting grew significantly in importance, compared to issuing a proxy to the company's proxies. Contrasting with 2019 where an average of less than 20% of the votes cast were received by postal vote, in the 2020 season this figure was over 42% - which certainly relates to the lack of votes cast in person and the explicit format of electronical postal voting.
2. Most questions are received in the last two days.
   1. The deadline for submitting questions was determined differently; shareholders are given until the end of the second day before the virtual AGM (midnight) to submit questions mostly.
   2. The number of questions was slightly below the level of the last physical AGM, but often with different questioners than at the AGM.
   3. The quality of questions was consistently very high.

Overall, during the AGM season, a clear learning curve occurred among all the players: In springtime, one still saw board chairmen with small-patterned shirts and iridescent ties; the teleprompter became a new friend among board members, and major shareholders and committee members were encouraged to cast their votes early so that stakes were not missed and to prevent random majorities.   The legislator complied with the majority request of capital market participants and replaced the opportunity to ask questions with the right to ask questions and shortened the deadline for submitting questions to one day (previously two days) before the AGM. The pressure on the board of directors was also increased to answer the submitted questions in full and not according to pure discretion. In addition, the legislator has again tightened the right to submit motions. Thus, motions submitted in due time in the run-up to the AGM must be treated as having been submitted at the AGM. This arrangement is again similar to conventional physical AGMs.

A look ahead to 2021

For the 2021 season, it remains to be seen how companies will position themselves on the capital market with the conduct of the AGM. Especially regarding the right to ask questions, there is room to manoeuvre to enable this in a shareholder-friendly way up to the AGM. It is already being discussed whether and to what extent public limited companies will comply with the possibilities of a more shareholder-friendly arrangement. It can be assumed that companies from the DAX, MDAX and SDAX indices could speak out in favour of a more shareholder-friendly structure. In view of last year's learnings from virtual AGMs, this is certainly the next logical step. Smaller listed companies, which are not the focus of capital market players, will probably comply with the law and not make use of any leeway.

It will be exciting to see to what extent Clearstream's lack of SRD II readiness will hinder the transmission of information between the company and shareholders in the 2021 season. Numerous banks and intermediaries have not yet adapted their systems to the new SWIFT standard ISO 20022 and the old standards for data transmission do not meet the requirements of the EU Regulation. We expect considerable additional effort here due to the lack of standardisation.

The AGM season will probably be dominated by the topics of board remuneration, especially executive board remuneration and ESG. With the entry of the SRD II, a vote of the AGM will be required for the approval of a remuneration system which will lead to many companies placing this on the 2021 agenda.