As the COVID-19 global pandemic continues, companies are required to respond quickly to ever-changing demands on their day-to-day business operations. From a corporate governance perspective, companies are being faced with the difficult decision of where, when and how to hold their upcoming annual general meeting ("AGM") in light of recent recommendations from federal and provincial health authorities to stay physically distant and avoid in-person gatherings. This article outlines the various options for companies incorporated pursuant to the British Columbia Business Corporations Act (the “BCBCA”) with respect to holding (or not holding) their upcoming AGM in compliance with both the requirements in the BCBCA, and the recommendations from federal and provincial health authorities.
*Note: Most of the statements in this article will apply broadly to companies incorporated in Canada both federal and provincially; however, this article addresses the requirements specific to private companies incorporated pursuant to the BCBCA.*
In general, private companies incorporated in B.C. are required to hold an AGM at least once in each calendar year and not more than 15 months after the date of the company’s previous AGM. However, if an in-person AGM cannot be held during the requisite time frame, the BCBCA allows for various alternative approaches, including:
This article discusses the alternative approaches and the factors to consider when deciding which is appropriate for the company.
Instead of holding the AGM in-person, the company may opt to hold its AGM virtually. The BCBCA allows shareholders to conduct meetings by telephone, video conference, or other communication medium, subject to the following requirements set forth in the Act: (1) the articles must not expressly prohibit virtual meetings; (2) all participants must be able to communicate with each other; and (3) voting must be by poll or by another manner that adequately discloses the intentions of the shareholders. Persons participating by any communications medium are deemed to be present at the meeting for the purposes of quorum, and the meeting is deemed to be held at the location specified in the notice of meeting (not in cyberspace or in the multiple locations in which remote attendees are physically located).
The AGM may be fully virtual, or a hybrid (both in-person and virtual attendees). With a fully virtual AGM, shareholders do not have the option to attend the meeting in person; the entire meeting, including the voting is held virtually. Some attendees may attend via telephone conference and some via videoconference or other medium, so long as all participants are able to communicate with each other. In contrast, with a hybrid AGM, both in-person and virtual participation are allowed. The meeting will have a physical location where some attendees (perhaps key executives) will participate in-person, and others will participate virtually.
There are many practical considerations and potential challenges involved with hosting a virtual or hybrid AGM. Firstly, the company will need to ensure that it has the appropriate technology in place to hold a virtual or hybrid meeting, and the technology will need to be tested well in advance of the meeting to ensure that the communication requirements in the BCBCA are met. Secondly, the notice sent out to shareholders in advance of the meeting will need to provide details regarding the location of the meeting, the ways in which shareholders can attend and participate, and how votes are cast. If a hybrid meeting is held, the company will need to either limit the number of in-person attendees, or ensure that appropriate physical distancing procedures can be maintained.
Holding a virtual or hybrid meeting for the first time will take some trouble-shooting and some companies may not have the resources to host a virtual or hybrid AGM in the required time period on relatively short notice. In this case, the company may wish to consider other alternatives such as transacting business by written consent resolution, postponing or waiving the AGM, or seeking an extension from the registrar.
Instead of holding an AGM in person or virtually, the shareholders may consent to the business to be transacted at the AGM by a written consent resolution approved by all shareholders entitled to vote on the resolution (i.e. both voting and non-voting shareholders with respect to certain matters, such as the waiver of the appointment of an auditor). In B.C., these consent resolutions may be signed and returned to the company’s records office, thereby allowing shareholders to approve annual business while maintaining physical distancing requirements.
Many closely-held companies have already adopted the practice of passing annual business by consent resolution; however, this may not be a practical alternative for some companies, especially those with many shareholders or an activist shareholder(s) that refuses to sign the annual resolutions.
Even if the company is able to obtain unanimous shareholder approval, the AGM is frequently used as an opportunity to discuss operational or governance matters, or to consider matters other than those specifically required to be dealt with at an annual general meeting. In this instance, the company may approve the annual business by consent resolution and defer the special business to a later time at an extraordinary meeting. This will allow the company to meet the requirements regarding its AGM in the BCBCA, while also having the opportunity to discuss and debate other matters at an extraordinary meeting scheduled for a date in the future.
If nonetheless, the company still wishes to hold a meeting, it may consider postponing or waiving the AGM, or seeking an extension from the registrar.
The shareholders may defer the AGM to a later date by unanimous written consent resolution of all the voting shareholders; provided the resolution is passed on or before the date in which the current AGM is required to be held. Therefore, unlike with waiver of the AGM (discussed below), the resolution will need to be passed before the required date of the current AGM; any purported postponement after that date will be invalid.
When considering whether to postpone its AGM, a company should consider the practical implications of doing so. Firstly, as discussed above with respect to passing annual business by consent resolution, it may be difficult for the company to obtain approvals from every voting shareholder, especially in advance of the required date for the AGM. ****Secondly, although there is no time limitation in the BCBCA as to the date to which the current AGM may be postponed, since the AGM for the following period must still be held, the company will need to coordinate having two AGMs in one 15 month period. Lastly, since we do not know when physical distancing procedures will be relaxed, the company will need to consider whether an in-person meeting will be able to be held on the new date, or a virtual meeting will need to be considered.
If the AGM is postponed, the company will also need to consider the following regarding business that is to be passed at the AGM:
If obtaining a unanimous written consent resolution is possible, but the company is either unable to obtain the resolution before the required date of the current AGM, or otherwise does not wish to postpone the AGM for one of the reasons listed above, the company may consider waiving the AGM all together.
The shareholders may waive the requirement to hold an AGM in the current period by unanimous written consent resolution of all the voting shareholders. In contrast to the deferral of the AGM, the unanimous resolution for a waiver of AGM does not need to be passed in advance of the required AGM date. The unanimous resolution must indicate the AGM that is being waived and manually set an annual reference date for that period. The list of matters to consider regarding business to be passed at the AGM in the postponement section above will also apply to a waiver of the AGM.
In the event that the company is unable to obtain a unanimous written consent resolution from its shareholders, the company has the option to apply to the registrar for an extension of the required AGM date.
The company may apply to the registrar to extend the period in which the company must hold the AGM. The registrar will extend the date if it is “satisfied that it is appropriate to do so and on the terms and conditions the registrar considers appropriate.” There is nothing in the BCBCA to suggest that this application cannot be made after the date the meeting was required to be held; however, this will ultimately be at the discretion of the registrar.
There is no one correct course of action for companies considering if and how to hold an upcoming AGM; the decision will depend on the specific circumstances applicable to each company and the provisions in its articles. Due to the potential for some form of physical distancing practices to continue in the future, it is likely that virtual or hybrid meetings will become much more common among BC companies. For those companies that do not currently have the technological capabilities or resources required to hold a virtual or hybrid AGM on relatively short notice, postponement or waiver may be a temporary solution. The company will then have more time to test the technology and processes required to hold a virtual or hybrid AGM in the following period.
Note: The decision as to whether to hold an AGM virtually, pass a written consent resolution in lieu of the AGM, postpone or waive the AGM, or request an extension from the registrar will depend on the specific circumstances applicable to each company and the provisions in its articles. We recommend speaking with one of our corporate lawyers regarding how the considerations in this article apply to your company’s specific circumstances.