Ensure the validity of all aspects of shareholder voting at general meetings!

 

Background

Since the pandemic, legislation has been updated to ensure the validity of shareholder voting at general meetings. In June 2020, the UK Government introduced legislation that included a temporary clause that allowed companies to undertake these democratic processes entirely in a virtual manner, making use of online meeting and voting systems. This legislation expired on 30 March 2020.

In addition, legislation was also amended in The Companies Act 2006 to include a provision that makes it mandatory for shareholders to receive a receipt of confirmation for any vote cast electronically during a poll. The confirmation receipt must be sent as soon as reasonably practicable after the vote has been received and must be sent by electronic means to the person casting the vote (i.e. shareholder, proxy or nominated representative). Further to this, the voter can request information that their vote was validly recorded and counted, within 30 days after the close of the poll.

The above relates to UK public traded companies with shareholders.

Polls

The legislation only applies to polls which are usually called during the meeting (articles permitting), these include polls that are demanded by a group of shareholders or by the chair. The legislation does not apply to the initial ‘usual’ process of voting on resolutions at the general meeting and proxy voting ahead of the meeting.

In our experience, polls are only ever called at a meeting if the decision in question is close, if a group of shareholders wish to challenge the process, or if the chair wishes to undertake the process again.

Electronic Voting Security

The legislation creates a potential security issue for suppliers of remote electronic voting systems that generate and send an automated email once a vote is cast. Firstly, the voting system will have to be capable of knowing the identity of the voter, which means it will hold all of the voter details within it. This is a potential target for hackers as details of shareholders and their shareholding is sensitive data and therefore protected by GDPR legislation.

Secondly, the suppliers of these types of platforms will have an email delivery system included or use a 3rd party email delivery system. This means that there is a potential ‘hole’ in the security of the voting system as the electronic delivery of the receipt will consist of data passing between systems. This is a common security issue for ‘man in the middle’ attacks.

Pandemic: Running Remote General Meetings

As a result of the pandemic, PLCs are looking to undertake their general meetings remotely and online. In many cases, their articles do not allow or have any provision to undertake them in such a manner and normally provides that a place and physical attendance is required to comply with such articles.

Typically, scrutiny of the organisation’s articles will be necessary to find methods of undertaking remote/online voting for all aspects of general meetings, this gives organisations flexibility with the usual legacy rules that have been in place for many years. In many cases, standard legacy wording relating to polls provides that the chair of the meeting can determine the methods used in undertaking a poll. This potentially gives organisations with legacy articles a lifeline to use alternative remote/digital processes for voting.

Organisations must be clear on the interpretation of their articles as the potential risk of being challenged could be high. Also, the legislation regarding voting confirmation receipts would apply to publicly trading companies meaning that organisations could face challenges on the validity of the process, but also the potential risk relating to general data compliance if email receipts are issued automatically.

Summary

Organisations should understand the limitations of their articles before undertaking remote/digital/electronic remote voting processes. This includes assessing the system security used by their election suppliers, where shareholder data (email addresses, shareholding etc.) may be used to provide an email receipt.

UK Engage

UK Engage is an experienced remote voting system supplier and has extensive knowledge to understand voting system requirements based on both legislation and the articles of the organisation in question. Advice can be provided on the best approach for the process needed to undertake valid general meetings. UK Engage uses a secure voting system that provides confirmation of receipt without the risk of using email delivery systems or putting shareholder data at risk.

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