New ICSA guidance on quoted company notice periods

The Institute of Chartered Secretaries and Administrators (ICSA) has published guidance on Provision E.2.4. of the UK Corporate Governance Code (Code) and the general meeting notice requirements under the Companies Act 2006 (Act).

The position under the Act and the Code

As a reminder, generally speaking the Act requires companies to give 14 clear days’ notice for general meetings, and 21 clear days’ notice for AGMs. For “traded” companies (which includes those listed on the Main Market, but not AIM), companies can only call general meetings (other than an AGM) on 14 clear days’ notice if they are authorised to do so by a resolution of shareholders. Accordingly, most quoted companies take such a standing authorisation at each year’s AGM.

These resolutions are usually passed without controversy, but US proxy advisory firms do tend to recommend voting against the authorisation, citing (perhaps understandably) the logistical difficulties that overseas shareholders would face in ensuring that they have sufficient time to properly evaluate and submit proxy votes in respect of the business of the meeting.

The Code recommends longer notification periods than those prescribed by the Act, with 20 working days’ notice for AGMS, and 14 working days for other general meeting.

Against this backdrop, ICSA has set out its view of the expectations of UK institutional investors in relation to notice periods for general meetings.

ICSA’s guidance

ICSA states in its guidance that:

• investors who have given prior authority for 14 day notice periods for general meetings will expect companies to give their reasons for doing so when using this authority;
• in its view, whilst companies will not use the option to give only 14 clear days’ notice unless it is necessary for them to do so, it is helpful for shareholders to receive as much notice as possible; and
• where companies are not able to meet the Code recommendations on notices for general meetings, this should be explained in the company’s annual report in the same way as any other departure from the Code.

Source: ICSA, Guidance note: UK Corporate Governance Code Provision E.2.4.