Preparing for the 2024 AGM

As the 2024 AGM and reporting season gets underway, we give an overview of the key issues affecting listed and AIM companies.

 

AGM ARRANGEMENTS

2023 saw the continued return to in-person physical meetings with fewer companies supplementing their in-person meetings with technology to allow for live interaction or voting for shareholders participating remotely. Alongside the return to physical meetings, an increasing number of companies permitted shareholders to submit questions in advance of the AGM and we expect this to continue this year. This approach is encouraged in the FRC’s ‘Good Practice Guidance for Company Meetings’ which aims to assist companies in improving shareholder participation in meetings.

 

SHARE CAPITAL RESOLUTIONS

Allotment authority

In 2023, the Investment Association updated their guidance relating to the director’s authority to allot shares typically sought annually at AGMs. Their updated guidance (Share Capital Management Guidelines 2023) permits up to two-thirds of the issued share capital to be allotted by directors provided that any amount in excess of one third may be used for a fully pre-emptive offer (previously it was limited to rights issues but now includes open offers).

Disapplication of pre-emption rights

Notwithstanding the introduction of increased disapplication amounts in the Pre-Emption Group’s Statement of Principles published at the end of 2022 (Statement of Principles 2022), many companies have not yet taken advantage of the additional flexibility to seek disapplication authorities for 10% of the issued share capital for general purposes and an additional 10% for acquisitions or specified capital investments (with an additional 2% in each category for follow-on offers to existing shareholders). The Institutional Shareholder Service and Glass Lewis have both confirmed their support of the increased thresholds and we expect to see further companies taking advantage of the increased amount in 2024.

 

ESG

Diversity

This year, listed companies with a 31 December year end will report for the first time on:

• the additional diversity targets set out in the Listing Rules; and
• the additional disclosures in the corporate governance statement regarding board diversity, which both apply in respect of accounting periods beginning on or after 1 April 2022.

As a reminder, the additional reporting requires companies to include a comply or explain statement on whether the company has achieved certain board diversity targets and to provide data on sex or gender identity and ethnic diversity of the company’s board and executive management team, together with an explanation of how this data was collected.

Directors’ remuneration

Remuneration continues to be an area that is heavily scrutinised and 2024 is likely to be no exception. The Investment Association, in its 2023 Principles of Remuneration, reminds companies that they should show restraint with any pay increases.

Climate change

2024 is the first year all listed and AIM companies with more than 500 employees are required to report climate related information in the Non-Financial and Sustainability Information Statement in their annual reports. The disclosures should cover how climate change is addressed in corporate governance, the impacts on strategy, how climate-related risks and opportunities are managed and the performance measures and targets applied in managing these issues. These required disclosures align with the Task Force on Climate-related Financial Disclosure recommendations and sit alongside the Listing Rules requirements. BEIS has published non-binding guidance (Mandatory climate-related financial disclosures by publicly quoted companies, large private companies and LLPs - non-binding guidance) to assist companies understand how to meet these disclosure requirements.

The obligations apply to companies with an accounting period beginning on or after 1 April 2022 which means companies with a 31 December year end will make those disclosures for the first time this year.

 

FUTURE DEVELOPMENTS

Corporate Governance

January 2024 has seen the publication of a revised Corporate Governance Code (Code) with the FRC taking a targeted approach, focussing on a limited number of changes. The main substantive change relates to internal control. With effect for financial periods beginning on or after 1 January 2026, the board is required to explain through a declaration in their annual report how it has monitored the company’s risk management and internal control framework and its effectiveness.

Other changes, which take effect for financial periods beginning on or after 1 January 2025, include amendments relating to malus and clawback provisions. For a summary of all the key changes see: UK Corporate Governance Code 2024 Key Changes. As announced in November 2023, the FRC withdrew its original proposals for revisions relating to the introduction of additional corporate reporting requirements including an annual resilience statement, a distributable profits figure, a distribution policy statement, a material fraud statement and a triennial audit and assurance policy statement.

 

FURTHER GUIDANCE

For further information or advice on any of the matters discussed in this publication, or to obtain a copy of our annual report and accounts checklist for officially listed or AIM companies, please get in touch with your usual Corporate contact at DLA Piper.