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At Telecom Plus plc’s (Telecom Plus) annual meeting on 26 July 2022, the energy supplier’s to amend its articles of association to allow for exclusively virtual shareholder meetings failed to pass, with 44.8% of votes cast against. Although 55.2% support would usually prove sufficient for an ordinary resolution to scrape through, amendments to articles via a special resolution require a majority of 75% to pass (for more information, see: Practice Note: ).

This resolution is not only the first amendment of articles resolution to fail during the 2022 AGM season, but also the first to receive at least 20% opposition. Unusually, Telecom Plus did not comply with the ’s (UKCG Code) recommendation to address the dissent against the resolution in its voting results, merely noting in its introduction that ‘all resolutions put to shareholders of the Company, with the exception of Resolution 20, were duly passed'.

The sought permission to hold exclusively virtual meetings, with no mention of a hybrid approach:

‘This resolution, which will be proposed as a special resolution, proposes to amend the articles of association to permit the Company to hold wholly virtual shareholder meetings, including AGMs. These changes are being introduced to provide the Board with greater flexibility to align with technological advances and evolving best practices, particularly in light of the covid pandemic. The Board believes that virtual meetings will allow for greater shareholder and stakeholder engagement over the coming years in a way that is more convenient for all parties.’

Often when companies put forward resolutions to introduce the ability to hold exclusively virtual shareholder meetings, they are bundled together alongside the right to hold hybrid AGMs. For instance, on 31 May 2022 shareholders overwhelmingly voted in favour (94.6%) of the following to articles resolution:

‘Article 59 shall be amended by the deletion of the sentence “The Board may call general meetings whenever and at such times and places as it shall determine.” and in its place the following words shall be inserted the words “The Board shall determine whether any general meeting is to be held as a fully electronic general meeting or a physical general meeting or a combined physical and electronic general meeting. The Board may (i) call general meetings whenever and at such times and places, including with the use of electronic platforms, as it shall determine; and (ii) make whatever arrangements it considers fit to allow those entitled to do so to participate in any general meeting.�Ũ�ę [emphasis in original].

Over the past few years, shareholders have generally voted in favour of article amendments to allow companies to hold hybrid AGMs, with numerous FTSE 350 companies putting forward such resolutions during the temporary restrictions of the coronavirus (COVID-19) pandemic. Telecom Plus itself an amendment to its articles at its 2020 AGM to allow for the ability of the company to hold a hybrid AGM, noting ‘the importance of shareholders being able to attend general meetings in person’ and stating that ‘the amendments do not permit the Company to hold exclusively electronic general meetings’. The resolution was with 99.9% support from its shareholders.

However, the attempt by Telecom Plus to move from allowing hybrid AGMs to also allowing virtual AGMs as part of an unbundled package seems to have proved a much harder sell to investors. Since the first entirely virtual meeting took place at on 15 June 2016, virtual meetings have proved not only controversial on the grounds of corporate law, but also with regards to corporate governance (for more information on the subject of virtual AGMs, see Practice Notes: and , as well as Market Tracker blog post: Virtual meetings in the UK corporate landscape post-coronavirus).

The company tried to justify the move in its by stating that the ‘changes are being introduced to provide the Board with greater flexibility to align with technological advances and evolving best practices, particularly in light of the covid pandemic…[���Ի�� will allow for greater shareholder and stakeholder engagement over the coming years in a way that is more convenient for all parties’. However, why hybrid AGMs do not already do this was not addressed by the company.

Companies often emphasise that they believe virtual meetings will improve shareholder engagement in their AGM notices in a similar vein to Telecom Plus above. For instance, , which held virtual AGMs in 2020, 2021, and 2022 justified such a format this year on the grounds of ‘continued uncertainty, and to encourage shareholder participation’. This is despite the fact that coronavirus restrictions in England were no longer in place at the time. However, many investor organisations beg to differ on this point. For example, the Investment Association’s (IA) on virtual AGMs, which was published back in 2017 before the coronavirus pandemic stated that:

‘The AGM is the only time that the Board must be publicly accountable to all its shareholders. The attendance of the Board to such meetings is a demonstration of their commitment to understand the views of shareholders.

“Virtual-only” AGMs remove this accountability due to the remoteness of participants. Investors believe that the public nature of AGMs and full attendance of the Board is important to allow them to bring matters to the Board’s attention. Removing this tool impairs the ability of investors to hold Boards to account on behalf of their clients.

It is harder for participants to identify the views of fellow participants in a virtual-only format, and to register agreement (or disagreement). Companies who adopt a “virtual-only” approach may also risk giving the impression that they are attempting to filter questions or participation of shareholders and do not want to be subject to the questions of their shareholders.’

Despite the coronavirus pandemic and the general change in attitudes to hybrid and virtual meetings in its aftermath, the IA is yet to update its guidance on the subject, which is still available on the Institutional Voting Information Service’s .

More recently, International proxy adviser, Glass Lewis, its updated approach to virtual meetings on 14 January 2021, which noted the following:

‘There are two clear benefits for companies and their shareholders of meetings that allow for virtual attendance. Firstly, there are generally substantial cost-savings, which range from financial savings on venue hire, catering, and accommodation, to the reduced environmental impact of fewer journeys. Secondly, shareholders that would have in any case been unable to attend the meeting in person or be represented by a proxy are generally afforded increased abilities to participate in the meeting.

However, any potential benefits for shareholders beyond this are largely dependent on decisions taken by a company and, where in-person attendance is not permitted, there exists the potential for the substantial restriction of shareholder rights unless companies develop and disclose clear procedures to enable the participation of shareholders and allow for engagement with the board.’

It is therefore likely that the sizeable dissent was due to shareholder concerns in relation to gifting the company further freedom of movement with regards to possible AGM formats, as well as a general satisfaction with the current state of affairs, which already allows for hybrid AGMs. However, in the absence of any disclosed reasons for the revolt in Telecom Plus’ AGM results, shareholders will have to wait for an official explanation in its update statement, which the company should publish within six months under provision 4 of the UKCG Code.

For more information on AGM formats during the 2022 AGM season, see our recently published Trend Report: .