COVID-19: Accounts and AGMs
Following on from the recent relaxation of the annual accounts filing requirements under the Companies Act 2006, companies might have expected the relevant authorities that govern them to adopt a uniform approach; alas not. In addition, despite mention of possible measures to be taken, the government has not yet brought the annual general meeting (AGM) regime into step with the relaxation of the accounts filing rules.
So where does that leave you?
- Accounts
The preparation of annual accounts within 6 months (for a public limited company) and 9 months (for a private company) of the year end is a Companies Act requirement. However, following a recent announcement, companies may apply to Companies House for a three month extension and apparently this will be granted automatically if it is COVID-19 related. This is a simple online application but must be made before the 6-month deadline expires. However, this extension may not be available to companies that have shortened or extended their accounting period.
Listed companies
Companies who are subject to DTR4 have to publish annual as well as half-year accounts.
Annual accounts must be published within four months of the relevant year end. A recent FCA announcement has extended this period by two months (but only if the company’s home state is the UK). So, listed companies will not be required to request a suspension of their shares if they have not published their annual accounts within the normal four-month period. However, this is not the same relaxation of the rules that Companies House is applying.
Half year accounts must be published within three months of the end of the relevant period. No extension has been offered for this deadline.
AIM companies
AIM companies must publish annual accounts within six months of the year end. However, the London Stock Exchange has announced a three month extension to that requirement to match the Companies House extension referred to above. This applies to AIM companies whose year-end falls between 30 September 2019 and 30 June 2020. So, not only will companies have to apply to Companies House for an extension, but they will also need to apply via their Nomad to AIM for the extension to the AIM requirement.
AIM companies also have to produce half yearly accounts, but these do not have to be audited. No extension has been offered by AIM for the preparation and publication of these accounts and so these must be filed within three months of the end of the relevant accounting period.
AQSE companies
AQSE Growth Market companies normally have six months from the end to publish their annual accounts. AQSE (formerly NEX Exchange) has announced that this period has been extended by one month only (which does not reflect the recent Companies House relaxation).
No extension has been offered for the publication of half yearly accounts and so these must be filed within three months of the end of the relevant accounting period.
- AGM
As regards the AGM, this is in a state of flux at present.
Many private companies do not need to hold an annual general meeting as neither the Companies Act nor their articles of association require one. For public limited companies and private companies whose articles of association still require them to hold an AGM, the AGM must be held within 6 months of the company’s year-end.
One might have expected the Government to say that if the annual accounts’ filing date was extended then the AGM date should be as well. While it has intimated that measures will be put in place around the manner in which the AGM is held (eg quorum issues and attendance by telephonic or digital link) and an extension to the period for holding an AGM, these have not yet been forthcoming. The Government expects companies still to hold AGMs (albeit in a modified manner to comply with COVID-19 measures) as it is the chance for shareholders to question management. In addition, the AGM is the mechanism to deal with certain annual corporate events (eg annual renewal of share authorities and reappointment of directors).
Unless or until the Government changes the rules, companies may find themselves in the odd situation of holding an AGM without the annual accounts having been prepared and published. There would be no annual accounts to adopt but the company would pass all the other normal resolutions such as reappointment of directors and renewing share authorities. Many of these authorities expire on the date of the following AGM or the end of a particular period and there must be a question now that such expiration takes place on the date by which the AGM should have been held in any event. So, there is a risk that the authorities will expire unless the company takes steps to renew them. Until measures are implemented by the Government, companies should still hold their AGMs in the normal way (but adapted to fit with current COVID-19 practice). This would mean:
- ensuring the AGM venue remains available and is not closed
- holding the AGM with only two shareholders present (as meetings of more than two people are not permitted)
- encouraging shareholders to vote by proxy
- reminding shareholders not to attend as they would be in breach of COVID-19 measures
- allowing shareholders to ask questions via email and posting the questions and answers on the company’s website
- allowing shareholders to attend the AGM by phone or other link where they would be permitted to ask questions but, unless the company’s articles so provided, they would not be able to vote. The company would need to have set up secure access by providing individual passcodes for each shareholder who wanted to attend in this way.
The Companies Act (s437) states that “The directors of a public company must lay before the company in general meeting copies of its annual accounts and reports.” So, even though it may have held an AGM, a company would still have to hold another general meeting where the shareholders resolve to receive and adopt the accounts.
In summary, while the Companies Act requirement for publishing accounts may have been extended, that extension may not match the requirements of your other rule makers. AGMs are still required (even if there are no accounts to adopt) but watch this space for further Government measures.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.
