A greener way of talking to your shareholders
The electronic communications provisions of the Companies Act 2006 came into force on 20 January 2007. They enable companies, subject to shareholder approval, to communicate with shareholders using email and the company’s website.
The Act applies to all documents sent to or from a company and is likely to be most useful for annual reports and accounts and notices of meetings.
Your website
Companies may send information to shareholders by publishing it on a website if shareholders have either agreed (generally or specifically) to website communications or are deemed to have done so. The ‘deemed agreement’ provisions are helpful as they cater for the position where shareholders do not bother actively to elect to receive information electronically.
A shareholder will be deemed to have agreed to website communications if:
- the company has passed a resolution in a general meeting; or
- the company's articles contain a provision permitting website communications (most companies will not have articles that allow this and so they will need to change their articles, preferably at an AGM); and
- the shareholder has been asked by the company to agree to website communications and either responds positively or fails to respond within 28 days. The request must warn shareholders that they will be deemed to have agreed if they do not respond.
When a document or other information for shareholders is to be posted on the website the company must notify shareholders that the relevant information is available, the website’s address, where on the website it can be found and how to access it. The notification may itself be made electronically, but not by means of a statement on the website.
Sending emails to shareholders
A company can send documents and information by email to:
- any individual shareholder who has agreed (generally or specifically) to receive documents or information in that way; or
- any corporate shareholder who has agreed or is deemed to have agreed to receive e-mail communications.
What to do next
These new provisions could provide substantial savings in costs and time (especially printing costs) for companies that have a large number of shareholders and/or where a large number of documents are to be circulated. They could also help reduce delays in the passing of resolutions where there are overseas shareholders or directors. There will, however, be the administrative burden of keeping track of which shareholders have agreed to receive electronic communications and which have not.
Many companies will not have wide enough powers in their current articles for the deemed agreement of the website route. If you want your company to be able to benefit from the new rules you should seek legal advice in good time before your next AGM.
For more information, please contact tom.shaw@speechlys.com or your usual Speechly Bircham contact.