Considerations for listed companies in response to COVID-19

COVID-19 continues to cause unprecedented disruption to all business operations, which includes the annual corporate calendar for listed public companies when preparing and filing accounts, holding AGMs and making dividend payments to their shareholders.

Below is a summary of the key considerations in these areas:

AGMs

Due to the restrictions on all “non- essential” travel, listed companies are not going to be in a position to hold physical AGMs as they may have done previously, so they need to make contingency plans if their AGM is due to be held when restrictions may remain in place. Below is a summary of the options available:

1. Delay convening the AGM

If a company has not yet issued its AGM notice, it may consider delaying or changing the venue of the AGM. The last date upon which a company may hold an AGM is 6 months after the end of its financial year. Subject to giving 21 days’ clear notice, this will be a viable option for a number of companies (however, perhaps more difficult for any companies with a financial year end of 31 December). If this option is chosen, the following should be considered:

• update the market with an announcement about the delay to holding its AGM;
• consider whether any existing authorities granted at the previous AGM expire – generally authorities will expire at the earlier of the next AGM or 15 months when passed;
• the new remuneration policy will need to be approved by no later than the end of the company’s current financial year end;
• consider how to deal with dividends and whether an interim dividend payment to shareholders would be an appropriate solution rather than a final dividend (although see below on the LSE’s latest announcement); and
• the contract with the venue provider will need to be reviewed to avoid paying costs if the venue is not used.

2. Postpone or adjourn the AGM

If a company has already issued an AGM notice, it may need to consider whether it can postpone or adjourn the AGM. Postponement of the AGM will only be an option if permitted by the company’s articles and any procedure set-out in the articles will need to be followed.

If a company cannot postpone its AGM, it may need to consider adjournment. A quorate meeting is generally needed in order to adjourn a meeting, but more flexibility may be contained in a company’s articles.

Any postponed or adjourned AGMs need to be held within 6 months of the company’s financial year end date, so there is not much leeway for those companies with a 31 December year end. Very similar considerations apply here to those who choose to delay their meeting.

3. Conduct a virtual or hybrid meeting

“Virtual only” meetings are unlikely to be an option, as they may not constitute valid meetings (since no one is physically meeting in the same place). Hybrid meetings (subject to the articles of the company) may well work where only two shareholders (one of whom is the chairman) are physically present in the same room (applying social distancing rules) with all other attendees attending “virtually” and all resolutions being passed by way of poll. It may be possible in the notice to include restrictions on the number of those attending the meeting in person (subject to the company’s articles). On 28 March 2020 the Government announced that it is intending to introduce legislation to ensure those companies required to hold AGMs will be able to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus. The details of this policy are yet to be revealed but it is expected that this will enable companies to host AGMs virtually.

Publishing of Accounts

Regulators have made the following extensions and guidance for the publishing of accounts. These measures have been designed to relieve the pressure on companies who are preparing and having their accounts audited whilst also dealing with COVID-19 issues in their businesses and to ensure the publication of accurate information by companies to maintain market confidence. Regulatory authorities believe that it is important for companies to take additional time over the preparation of their results to take account of the unprecedented circumstances.

Main Market listed companies

Main Market listed companies whose home state is the UK are ordinarily required to publish audited financial reports within 4 months of their financial year end date. The FCA would expect issuers to request a trading suspension where this requirement is not met.

However, on 26 March the FCA announced that listed companies would receive a 2 month extension to the deadline for publish their audited financial statements (in effect giving listed companies a 6 month period to file).

The FCA has also recommended that all listed companies review their reporting calendars, so that they are “making appropriate use of the time available within regulatory deadlines to ensure accurate and carefully prepared disclosures”.

The FCA appear to be conscious of current market practice where companies publish their preliminary statements of final results well in advance of the four month deadline. They are worried that companies who continue to follow this trend may jeopardise the effectiveness of their relief measures.

AIM listed companies

AIM companies with a financial year end date between 30 September 2019 to 30 June 2020 can apply for a three month extension to publish their annual audited accounts from the usual reporting deadline of 6 months after financial year end. The request for extension must be made to AIM Regulation by a nomad prior to the six month usual deadline. If the company is incorporated in the UK, then it will also at the same time need to apply to take advantage of the 3 month extension available under company law.

Dividends

On 25 March, the London Stock Exchange announced a 30 business day deferral period for the payment of dividends to shareholders, provided that the deferred payment date is no later than 60 business days after the record date. Once the deferral period expires, the dividend must be paid or cancelled.

However, any relaxation of the LSE rules does not affect the legal position around the payment of dividends. For example, if a final dividend has been declared at a general meeting of shareholders it is a debt payable to shareholders that cannot be cancelled by the board. Interim dividends can usually be cancelled at any time prior to them actually being paid.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.