Given the current social distancing rules in place in response to the coronavirus, many corporations may be considering alternatives to traditional in-person annual general meetings. If your company is considering making the switch to a virtual AGM this year, here are a few things to bear in mind:
1. Consult the corporate legislation
Before deciding to hold a virtual AGM, corporations must first consult the applicable governing legislation.
Federal corporations must look to the relevant provisions in the Canada Business Corporations Act (the “CBCA”). Generally speaking, the CBCA permits virtual AGMs as long as the by-laws of the corporation do not prohibit them. Further, the CBCA requires that a meeting must be held by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.
Ontario corporations must refer to the Business Corporations Act (Ontario) (the “OBCA”). Similar to the CBCA, the OBCA permits virtual meetings so long as the articles or by-laws of the corporation do not provide otherwise. The OBCA further provides that a shareholder who, using telephonic or electronic means, votes at the meeting or establishes a communications link to the meeting is deemed to be present at the meeting.
If your company was incorporated in a jurisdiction other than Canada or Ontario, be sure to reference the relevant legislation. Once you’ve determined whether the relevant governing legislation permits virtual AGMs, you should next consult the constating documents of the corporation – the Articles of Incorporation and the by-laws.
2. Consult the constating documents of the corporation
After determining whether your company’s governing legislation permits virtual AGMs, you must next review the company’s articles and by-laws. For federal corporations, you must confirm that the by-laws expressly permit virtual meetings. For Ontario corporations, you must confirm that there are no provisions in the articles or by-laws of the corporation that prohibit virtual meetings. Ensure that there is no language in the by-laws that require all meetings to be held at a particular physical location. If such a provision exists, it could be interpreted as a prohibition on virtual meetings. If there is a shareholders agreement in place, it should also be carefully reviewed to confirm that it does not prohibit virtual meetings.
If your company finds that it is not permitted to hold a virtual AGM, whether by its governing legislation, articles or by-laws, the company may wish to seek a court order to permit a virtual AGM.
AGMs can be held in an entirely virtual format or in a hybrid format. Purely virtual AGMs are conducted entirely by electronic means – there is no physical meeting location. Hybrid AGMs on the other hand, are a combination of a virtual and physical AGM. A physical meeting takes place, but shareholders may elect to attend by virtual means instead. Both virtual and hybrid meetings might enable shareholders who would otherwise require a proxy to actually participate in and vote at the AGM.
Questions? We can help.
If you’d like more information on virtual AGMs and whether your company should make the switch, please contact us for a no-obligation consultation.