AGM Alert 2016 guide published

We have published our AGM Alert 2016 guide for company secretaries and general counsel preparing for the AGM of a UK premium-listed company. The AGM Alert 2016 covers legal and regulatory changes, market practice and recent guidance on topical issues.

Looking back, shareholder dissent was less marked in the 2015 AGM season than in recent years. Companies also needed to deal with fewer legislative and procedural updates. This trend seems likely to continue in 2016, although companies will still be busy working through recent changes. In particular, companies must produce a long-term viability statement for the first time in 2016. With regard to the meeting, regulators and investors are keen this year to see much more of a response to any significant shareholder dissent.

Key points

AGM business and procedures

  • For some companies, this year will be the first opportunity to take advantage of the 2015 changes to the Pre-Emption Group Principles. These allow companies to disapply pre-emption rights for amounts of up to 10 per cent of issued ordinary share capital, although the excess over previous limits can only be used for acquisitions or specified capital investments. This involves making small changes to the notice and AGM circular.
  • Minor updates to AGM notices and circulars may also be required to ensure that buy-back resolutions reflect the new EU Market Abuse Regulation, in force this summer. In addition, buy-back programmes likely to extend beyond July 2016 should be reviewed for compliance with the new rules.
  • Amendments to articles are not required in 2016. Companies may wish to consider removing provisions which relate to bearer shares, as these have now been abolished. It is worth noting, however, that this can also be done outside the AGM using a simplified statutory procedure. Helpfully, FCA rule changes mean UK companies which do wish to refresh their articles no longer need to notify constitutional changes to the FCA and the market.
  • When announcing vote results, companies are encouraged under the 2014 revisions to the UK Corporate Governance Code to respond to significant votes against any resolution. This provision is now fully in effect. Companies should consider what would amount to significant dissent and, if it arises, what to say about this in their 2016 AGM voting results announcements.

Company reporting

  • New this year is the need for companies to make a long-term viability statement and for audit committees to confirm compliance with the CMA Order. Companies must also give a full list of subsidiaries and other related undertakings in the accounts.
  • The FRC and investors continue to focus on clearer, more concise reporting.
  • Outside the annual report and accounts, in 2016, companies will need to provide a new statement on slavery and human trafficking and financial and extractive sector companies will need to report on payments made to governments. New rules on reporting on gender pay gaps and the company’s payment practices are also expected. Companies may already deal with some of these issues in their annual reports and, therefore, should consider how to align their reporting obligations.

Directors’ remuneration

  • Helpfully, after companies have spent the last two years adapting to new statutory rules and industry guidance on pay, it appears that no immediate further reforms to this regime are currently likely.
  • Under the revised UK Corporate Governance Code, in 2015 a number of companies included clawback of pay in their board variable remuneration arrangements.
  • For the next AGM and reporting season, companies should again ensure that any changes to remuneration policies are appropriate for the longer term and that performance targets are properly disclosed. Companies should also carefully consider the effect of any clawback and whether or not directors’ expense payments need to be disclosed in the remuneration report.

Our AGM Alert 2016 is available on the Linklaters Knowledge Portal.