THE AGM 2010 ACTION LIST

• Check the deadline for holding the AGM: Read MoreAGMs must now be held in the 6 month period beginning with the day following the company's accounting reference date. Close

• Discuss the day of the week for holding the AGM with the Registrars: Read MoreUnless the company has already updated its articles to reflect new flexibility in proxy deadlines, this year it may make sense not to hold the meeting at the start of a week, so that the proxy deadline does not fall on a weekend, potentially incurring extra costs with the company's registrar. See further "Discuss record dates with the company's registrars" below. Close

• Update the resolutions in the notice of meeting: Read MoreThe wording of standard resolutions for directors' authority to allot, pre-emption disapplication authority and share repurchase authority resolutions will need to be updated.  While any subsisting authorities passed before 1 October 2009 can still be relied on, any new authorities taken at this year's AGM will need to reflect the Companies Act 2006.Close

• Discuss updating the company's articles of association with Mishcon de Reya: Read MoreCompany law has now changed so substantially that a company's articles are likely to be out-of-date, misleading and difficult to interpret.  They may also fail to take advantage of new flexibility under company law or (unless previously amended) to include recommended additional protection for directors.  While a company does not have to change its articles, many quoted companies have been doing so already and this trend is expected to continue and increase in 2010 now that the Companies Act 2006 is fully in force.   For many companies the changes required are now so extensive that it will be easier to adopt new, fully 2006 act compliant articles (building back in any particularly bespoke provisions from the company's existing articles) rather than to make piecemeal amendments to existing articles.  A resolution to amend the articles will need to be included in the notice of meeting and an explanatory note of the changes included for shareholders.  City law firms have produced standard wording to explain what the principal changes to a company's articles are, so for most shareholders, resolutions to adopt new articles, updated for the Companies Act 2006, should not be a surprise.  The resolution to amend the articles could also remove certain provisions of a company's memorandum which are now deemed to be part of the company's articles.  See "10 good reasons to update articles" below. Close

• If the company's articles are to be amended, check whether bank consent is required: Read MoreConsent may be required under the terms of any credit facility agreements, which we could check for you. Close

• Discuss record dates with the company's registrars and ensure any change is reflected in the notice of meeting:  Read MoreThe company is allowed to set a date for establishing voting entitlement at the meeting. The Uncertificated Securities Regulations 2001 allowed that date to be set no earlier than 48 hours before the meeting and this has now been amended so that any part of a day that is not a working day is not counted.  A similar change has been made in the Companies Act 2006 for the deadline for receipt of proxies.  If the company has already updated its articles to take the benefit of the change to proxy deadlines, both record date deadlines could now be aligned in the notice of meeting at 48 hours before the meeting, excluding non-working days from the 48 hour period.  Where a company's AGM is scheduled early in the week, this would avoid the voting record date and proxy deadlines falling on a weekend.  If the company has not yet updated its proxy deadlines in its articles, the deadlines should both be kept at 48 hours for this year.  Close

• Check that any designated corporate representative wording has come out of the notice of meeting: Read MoreChanges to company law in October 2007 lead to uncertainty last year over whether multiple corporate representatives appointed by a corporate shareholder would all be able to fully exercise a vote.  A work around was published by the ICSA which effectively allowed multiple corporate representatives to attend and vote and involved wording relating to the appointment of a "designated corporate representative" being included in some AIM companies' notices of meeting.  This should now come out, as the voting rights of multiple corporate representatives have now been clarified by further amendments to the Companies Act 2006, under the Companies (Shareholders' Rights) Regulations 2009.  Close

• Consider whether any shareholders are likely to use the AGM as an opportunity for shareholder activism and if so take advice: Read Morethe current economic climate and falling values may mean that shareholders are more likely to challenge their board of directors than in boom times.  In particular be aware that there are a number of statutory means at an activist shareholder's disposal which they can use at an AGM and shareholders have become more aware of these due to publications such as the Campaigner's Guide to the Companies Act.  Those applicable to AIM companies include: a right to require a resolution to be circulated and moved at the company's AGM (if received in time, the company may be required to pay the costs of circulating the resolution); and the ability to require a statement to be circulated about the business to be dealt with at a meeting. Close

• Be prepared for new voting rules at the meeting and to call a poll if necessary: Read MoreCompanies and their advisers should be aware of how changes to company law on voting by proxies and corporate representatives will affect voting on a show of hands and a poll.  Changes were made to the Companies Act 2006 by the Companies (Shareholders' Rights) Regulations 2009 in August 2009.  For example, if a proxy is appointed by more than one shareholder he will now (subject to the articles, which should be checked) have one vote for and one vote against a resolution on a show of hands if he is instructed to vote differently by those shareholders, but only one vote on a show of hands if he is instructed to vote in the same way by all of them.  From October 2007, a single shareholder has been able to appoint multiple proxies who all have a vote on a show of hands and this is still the case.  As before, where voting on a show of hands leads to an anomalous result, the chairman should require a vote to be taken by way of a poll and companies should check with their registrars that unusual proxy activity is reported quickly and a poll planned, if necessary.  The changes are summarised more fully in the  ICSA guidance on implementation of the Shareholders' Rights Regulations.  Close

• Prepare a statement of capital on any share allotments:  Read MoreWhere a company is to issue shares after the AGM, e.g. under an employee share scheme, it will now need to file a "statement of capital" with Companies House.  This may not be as simple as it may seem as requirements to state the amounts paid up on each share and to set out rights attached to the shares can in some circumstances cause difficulty.  The ICSA has published guidance on the requirement to state the amounts paid up on each share: see the ICSA Guidance on Statements of Capital.  Practice on completing statements of capital is developing, with further guidance being published by Companies House and further government consultation, so it is worth checking the up-to-date position with us. Close

• Check annual report and accounts reporting: Read MoreWhile the detailed reporting requirements for annual report and accounts are not covered by this update, it is also worth noting that AIM are currently consulting on a proposal to require details of the remuneration of each director to be set out in the company's annual audited accounts. This is proposed in relation to financial year ends of 31 March or after. The spotlight has also been thrown on board performance and remuneration and directors' role in managing risk and long term incentives to management as part of the recent banking crisis.  As a result, the Financial Reporting Council is currently consulting on changes to the Combined Code of Corporate Governance.  Most AIM companies are not required to report compliance against the Combined Code (having regard instead to the Quoted Company Alliance guidelines for AIM companies), although some do.  The changes to the Combined Code (which is also to be renamed the UK Corporate Governance Code) are not expected to be effective until the middle of this year.  Finally, if the company has already updated its articles to allow board authorisation of directors' conflicts of interest (see "Enabling the board to authorise directors' conflicts of interest" below), it may also have undertaken to report annually on the company’s procedures for ensuring that the board’s powers of authorisation of conflicts are operated effectively. This should be checked. Close

10 GOOD REASONS TO UPDATE YOUR ARTICLES

As well as generally to update, modernise and simplify the drafting and do so in a year while the changes are expected and familiar to investors, here are 10 of the main advantages to updating your articles.  The date on which the change to the law enabling the amendment took effect is shown in brackets - the most recent are listed first. 

1. Removing objects clauses from the articles so the company benefits from "unrestricted objects" Read More(Oct 2009):  The Companies Act 2006 now deems the often lengthy objects clauses previously found in companies' memoranda of association to be part of the company's articles, unless removed - removing these provisions can help with future financings and avoid uncertainty and technical corporate capacity argument. Close

2. Removing the limit on shares which can be allotted known as "authorised share capital" Read More(Oct 2009): Companies currently have a limit on the number of shares they can issue known as "authorised share capital" and this is also now deemed to be part of a company's articles.  Removing this limit in line with modern company law means there is one less authority to consider when a company is issuing shares. Directors' authority to allot will still be required save in respect of employee share schemes. Close

3. Allowing the Board to resolve to change the company's name Read More(Oct 2009): Directors may now be given the power in the articles to change the company's name which would avoid the costs of convening a shareholder meeting to pass a special resolution. Close

4. Allowing the Board to set the terms and conditions of redeemable shares, avoiding the need for a shareholder resolution on allotment of redeemable shares Read More(Oct 2009):  Previously, to issue redeemable shares, a company had to amend its articles to include the terms and conditions of redemption.  Now, the articles (or the company by ordinary resolution) may authorise the board to set the terms and conditions of redemption of redeemable shares.   Close

5. Implementing ICSA recommendations on new voting requirements Read More(Aug 2009): As explained above at "Be prepared for new voting rules at the meeting", the law relating to voting of multiple proxies and corporate representatives has been amended.  The ICSA recommends that companies amend their articles to bring them into line with the new rules (which can be overridden by the company's articles in some circumstances).  They also recommend clarifying how a proxy who receives a "discretionary vote" instruction should vote on a show of hands. Close

6. Enabling the board to authorise directors' conflicts of interest and including provisions for dealing with conflicts of interest Read More(Oct 2008): Directors are now subject to very broad duties to avoid situations of actual or potential conflict of interest, unless such conflicts are authorised in advance.  If the articles have not already been amended to do so, the company should update its articles to allow the board (rather than the shareholders) to give such authority and include provisions to enable the directors to effectively deal with any conflicts without breaching their other duties to the company. Close

7. Extending provisions on directors' indemnities Read More(Oct 2008): The powers of a company to indemnify directors and fund directors' expenditure have been widened in the act and the powers in the articles could be amended to reflect this. For example, a company that is a trustee of an occupational pension scheme can now indemnify a director against liability incurred in connection with the company's activities as trustee of the scheme.  Also the exemption allowing a company to provide money for the purpose of funding defence in court proceedings can cover regulatory proceedings and cover associated companies.  Close

8. Setting deadlines for receipt of proxies to exclude non-working days Read More(Oct 2007): As explained above at "Discuss record dates with the company's registrars", this can avoid the deadline falling on a weekend, potentially reducing costs for the company. Close

9. Reducing the notice period for meetings other than AGMs to 14 clear days Read More(Oct 2007): A company may need to convene a shareholder meeting other than an AGM in a number of circumstances, such as to raise further capital, where its allotment authorities and pre-emption disapplication authorities are not sufficient.  It is useful, and potentially less costly, to be able to do so on shorter notice than would previously have been required for such a meeting at which a special resolution was proposed. Close

10. To default shareholders to website communication and reduce printing and postage costs Read More(Jan 2007): The Companies Act 2006 allows a company to default a shareholder to website communication if the shareholder does not reply to a notification informing the shareholder that documents or information will in future be sent to him in this way.  By updating its articles (or passing an enabling resolution), if it has not already done so, the company will be able, for example to publish bulky documents, such as the annual report and accounts on a website and simply notify the shareholder in the manner agreed with him of the website address at which they are available.   Shareholders will still be able to request a hard copy.    AIM is currently consulting on changes to the AIM rules, due by the end of January, to confirm that accounts can be sent by AIM companies electronically. Close

OVERSEAS AIM COMPANIES

Most of the changes described above will not affect overseas companies admitted to AIM.  However, it would be worth discussing with us recent changes to the AIM rules.  In particular, the 2010 AGM would be a good time to:

• Make changes to the overseas AIM company's constitution to require compliance with extended shareholder notification rules found in the FSA's Disclosure and Transparency Rules:  Read MoreThese rules were amended to catch contracts for differences in June 2009 and at the same time guidance to the AIM significant shareholder rules recommended that overseas AIM companies update their constitution.  See our update "Recent changes to the AIM rules" on the Mishcon de Reya website. Close

• Consider the extent to which electronic communications with shareholders can be used to reduce costs to the company:  Read MoreAIM are proposing changes to the AIM rules, expected to be finalised by the end of January, to allow accounts to be sent to shareholders electronically.  A shareholder resolution would be required to be passed to allow this (and certain other requirements met).  The company's constitution and local legal requirements would also need to be checked. Close