Electronic communication with shareholders – written resolutions

As the lockdown restrictions continue to operate in the UK, a company’s ability to take important decisions and also communicate with its shareholders has become more challenging. Electronic communication between a company and its shareholders is a means to deal with the inability to hold meetings and can be used to a company’s advantage during the current pandemic.

In particular, private companies with a contactable shareholder base can look to deal with shareholder business by way of a written resolution, which allows shareholders of private companies to take and record decisions without needing a general meeting. Virtually all ordinary and special resolutions can be passed using a written resolution, provided the relevant percentage approval is obtained.

For an ordinary resolution, the required voting number is the approval of members holding a majority of the total voting rights of eligible members, and for a special resolution it is the approval of members representing 75% of the total voting rights. It is also worth bearing in mind that written resolutions can be required by members holding 5% of the shares, as well as the directors, and must be open for approval for 28 days (though if the relevant approval figure is reached the resolution is deemed to be approved).

In order to facilitate remote working and be able to circulate information and written resolutions, companies need to ensure that they have the relevant authority to communicate electronically with their shareholders. Communication by email or via the website is a quick and efficient way of contacting and informing shareholders and works well in the existing lockdown scenario.

You will need to review your existing articles to consider what changes are needed to allow for the sending of documents and information through your website, or you can pass a resolution to allow website communication, though this may mean other amendments that are required are missed.

There are various provisions that will be needed in your articles to allow documents to be sent to shareholders by email, and shareholders must consent to receiving communications by email as well as providing an email address. Delivery is deemed 48 hours after the information or documentation is sent.

There are different rules to allow for a company to send documents to shareholders via a website, and again the consent of the shareholders is required. Shareholders must be notified each time a document is posted on the website, and there are various rules for sending hard copy documents as well as time periods for documents to be maintained on the website.

There are additional rules and regulations for public companies, and do note that public companies cannot use the written resolution procedure.

Clearly in this lockdown period, the ability to be able to communicate electronically with your shareholders is crucial, and allows key company decisions to be made in a quick and cost-effective manner. It is not easy for companies to work remotely, but by ensuring you are able to transact business by way of written resolution and to communicate electronically with your shareholders will allow business to continue during this period and also provide a quicker and cheaper means of liaising with your shareholders in the future.

Contact our Corporate and Commercial team for more information.

Our Corporate & Commercial team are on hand to advise you accordingly.  If you require advice or a quote for our fees, please contact the team at corporate@ibblaw.co.uk or call 01895 207264 .