Companies Act 2006 - Communicating With Shareholders
by
Catherine Feechan and David Gilchrist
Introduction
There are some important changes to the way in which companies can communicate with their shareholders.
Electronic Communication
Under the Companies Act 1985 companies are already permitted to send notices of meetings and copies of their annual accounts and directors’ reports by means of electronic communication, provided that the company and the recipient have agreed to this. The electronic communication provisions of the 2006 Act came into force on 20th January 2007 ahead of implementation of much of the remainder of the Act.
The key change which is made in the 2006 Act is that shareholders will be able to communicate with the company by electronic means as well as the company communicating electronically with the shareholder.
Documents and Information Sent to the Company
Where a company has given an electronic address in a notice calling a meeting, it is deemed to have agreed that the document or information relating to proceedings at the meeting could be sent to it by electronic means, to that address. This is subject to any limitation specified in the notice.
Where the company has given an electronic address either in a proxy instrument or an invitation to appoint a proxy, it is deemed to have agreed that information relating to proxy appointments for the meeting can be sent by electronic means to that address.
This will allow shareholders to submit proxy appointments by email and companies may wish to ensure a separate mailbox is established to receive proxy nominations to ensure that none are inadvertently missed within emails received in the general mailbox.
The Act provides that a document or information sent in electronic form by a person to the company is sufficiently authenticated if the identity of the sender is confirmed in the manner specified by the company or, if no manner is specified, if the communication contains or is accompanied by a statement of the identity of the sender and the company has no reason to doubt the validity of the statement. Therefore where the company sends an email to a shareholder and receives a reply from the same email address it is able to accept that as adequately authenticated for the purposes of accepting an email submission of a proxy form or of an agreement to a written resolution.
Documents and Information Sent by the Company
Schedule 5 to the Act contains provisions regarding information sent by the company in electronic form. The documents or information may only be sent in electronic form to a person who has agreed to that form of communication.
Where the company wishes to communicate information via a website, it can only do this if the person has agreed to communications by that method. A member is deemed to have agreed to this if either:
- the company has passed a resolution that the company may supply documents or information via a website, or
- the company’s articles provide for this,
- and the member has been asked individually by the company to agreed the method of communication.
In making the request to members to agree to this method of communication, if the company receives no response within 28 days of such request, it is entitled to treat that as agreement to website communication. If the member does not agreed to website communication, he may either require hard copy documents or may provide a separate email address which he specifically agrees will be used for communication.
Where the company uses website communication it must notify the intended recipients of the presence of the information on the website and the details of the website address and how to access this information. This notification must be sent in hard copy or by means of electronic communication if the member has agreed to electronic communication. Documents must be available on the website for the entire period specified in the Companies Act, or if no particular period is specified, for 28 days from the date of notification to members that information has been posted on the website.
Notwithstanding receipt of an electronic version of the document a member continues to have the right to require the company to send him the information in hard copy form, and such a request must be complied with, free of charge, within 21 days of the receipt of the request.
It is important to realise that the electronic communication provisions are open to both private and public companies. Whereas their introduction has certainly been to ease the burden of paper administration which is borne by public companies, private companies may equally make use of these provisions by amending their articles and obtaining the agreement of shareholders to electronic communications.
It is important that all board members and office holders are made aware of these changes. Biggart Baillie LLP would be pleased to provide you with any further advice you require in relation to directors duties under the new Act, or on other aspects of the new legislation. If you are interested in any particular areas - please click here
The information contained in this article is given for general information only and does not constitute legal advice on any specific matter.