Whilst travel restrictions, “self-isolation” and “social distancing” practices will no doubt help to keep our communities safe and are therefore welcomed by the vast majority, they can cause a great deal of difficulty when it comes to the holding of company meetings. Although many companies will seek to delay routine meetings during these uncertain times, it remains vitally important that companies are able to take key decisions when they need to.
David Yetman, Group Partner
In very broad terms, a company and its owners make decisions in two ways. Operational decisions tend to be made by the directors of a company and certain matters, typically outlined in a combination of the Companies (Jersey) Law 1991 (the “Law”), a company’s articles of association (“Articles”) and any shareholders’ agreement that might be in place, have to be taken by a company’s shareholders.
A company’s Articles tend to provide that the directors of a company can conduct their business as they see fit. As such, the directors can usually readily resolve to make decisions in a way that suits their current circumstances. By way of example, during the current situation, the directors might agree to hold directors’ meetings by telephone or video conference rather than in person.
It is the decisions that need to be taken by shareholders that seem to be causing difficulties for a number of clients at present. The ability to make decisions by written resolution, rather than at a meeting of the shareholders of a company can prove very helpful. However, the way in which written resolutions can be used is largely determined by a company’s Articles. Whilst many Articles envisage written shareholders’ resolutions many, typically those relating to larger or older companies, do not. As a result, a company’s members must meet in order to make decisions. Some Articles allow purely virtual meetings to take place but many do not as they only envisage giving notice to the shareholders to attend a physical location. Many more Articles envisage a meeting be held at a physical location but that shareholders may attend by telephone or video conference. This latter option is frequently used and is generally sufficient as it is not often that a company is not able to host a physical meeting. However, with the present circumstances, many companies are not comfortable hosting physical meetings and can even be prevented by law from doing so.
It is generally not possible to change the venue of shareholders’ meeting once notice of it has been given. As such, if to location of a meeting is to be moved, the original meeting needs to be postponed and a new notice circulated to shareholders. Given that the Law provides that the shareholders of a company must be given a minimum of 14 days’ notice of a shareholder meeting, and indeed some Articles provide for an even longer period, this can create a very real problem for companies that need to deal with matters quickly. It seems that many businesses will need to be able to react as dynamically as possible at the moment so the ability to host virtual meetings is likely to be worthy of consideration for most companies at the moment.
There is no doubt that preparation is likely to be key here. In the modern day, technology can be of great assistance when it comes to seeking shareholder and director approval of matters but a company’s constitutional documents must be prepared in such a way to take advantage of these tools. Pinel Advocates would be pleased to carry out a review of your company’s constitutional documents in order to offer advice and assistance in relation to either imminent meetings or future meetings.
Note: This advice is correct as at 24 March 2020, but this is a quickly changing issue, so please do contact us for updated guidance.