28 May 2012

2012 AGM proxy problem fixed (almost)

Chairs of 2012 AGMs will hopefully be able to vote undirected proxies on the remuneration report without having to get ASIC relief or draft convoluted notices of meeting.

On 24 May the Government moved to fast-track a solution to a problem that has dogged public company AGMs since the introduction of the Two Strikes amendments last year. Because of a drafting error, the amendments prohibited chairs from voting undirected proxies on the remuneration report – which was exactly the opposite of what the Government had intended.

The Government initially reacted to this problem by tagging an amendment onto the end of a consumer credit Bill late last year. However, when that Bill became bogged down in parliamentary processes, the Government had to admit that the proxy problem might not be rectified in time for the 2012 AGM season.

The Government attempted to short-circuit the problem by giving the amendment its own Bill and introducing that Bill into Parliament last Thursday.

There is no absolute certainty that the Bill will be passed in time, but the Government clearly intends to give it its best shot. The Minister, Mr Ripoll, said that the Government was acting "to clarify the law in time for the end of the financial year and upcoming AGM season."

What's the problem and what's the fix?

The Two Strikes Act last year included provisions (sections 250R(4) and (5)) which together prevent a chair from voting undirected proxies on the remuneration report. In fact, the Government had actually intended to allow such proxies to be voted. (For more details, see Danger: undirected proxy!.)

The Bill introduced last week includes a new section 250R(5). In effect this will allow the chair to vote an undirected proxy on the remuneration report if: 

  • the proxy does not specify the way the proxyholder is to vote on the remuneration report; and
  • the proxy expressly authorises the chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the key management personnel for the company or, if the company is part of a consolidated entity, for the entity.

I'm about to start planning for my AGM

The fact that the Government is trying to get the amendment passed as a matter of urgency means that there is a good chance that it will be in place before many companies are too far advanced in planning their AGMs.

However, until the Bill has been passed by Parliament, there is no cast iron guarantee that the problem will be fixed.

Companies which cannot wait to see if the Bill will be passed should, therefore, still consider using one of the alternative methods of ensuring the undirected proxies can be voted.

 

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