Shareholder participation and information

By David Landy.

Key Points:
Companies will be able to cut their postage bills if shareholders embrace electronic communications.

Shorter, clearer meeting notices and greater use of electronic communications are at the heart of CLERP 9's reform of company meeting procedures.

Presentation of notices of general meetings

The information in a notice of meeting will be required to be worded and presented in a clear, concise and effective manner.

What will this mean in practice?

In the context of product disclosure statements (which are subject to a similar requirement), ASIC has encouraged the use of communication tools (eg text, tables, diagrams and graphs) to promote understanding and has suggested the use of plain language, the avoidance of industry and legal jargon, and if necessary, the provision of simple examples.

A failure to comply with the new presentation requirement could result in an injunction to prevent a meeting being convened (on the basis that the notice of meeting was defective). However, holding a meeting based on a defective notice would not ordinarily result in the invalidity of the meeting or any business conducted at the meeting - unless there were substantial injustice that couldn't be remedied by an alternative order.

Shorter notices of general meetings

The Corporations Regulations will be able to specify that a notice of meeting of a company's members is not required to include certain kinds of information. The Regulations are not yet public, but it is suggested that they might allow such things as:

• exclusion of information which has been lodged with ASIC (ie an incorporation by reference); or
• exclusion of complex descriptions of a possible transaction for which member approval is sought, on condition that full details are clearly referred to and made readily available to members who wish to examine them.

The aim of these provisions will be to balance the desirability of making full and fair disclosure against the need to avoid confusing the typical member to whom the notice is directed.

Electronic distribution

Currently, a company may give notice of a meeting to a member by sending it to an electronic address (if any) nominated by the member.

Under CLERP 9 amendments which will come into operation over the next year, members will be able to nominate:

an electronic notification means (eg an email) by which they would be advised that a document (a notice of meeting or annual report) is available; and

an electronic access means (eg access via the company website) by which they would view or download the document.

For cost savings reasons, the collection and updating of email addresses and the document distribution preferences of a company's members will therefore become an increasingly important function in maintaining the register of members for large companies.

Under the replaceable rules, a notice of meeting given by this electronic facility will be taken to be given on the business day after the day on which the member is notified that the notice is available. This may be adopted or replaced in a company constitution.

The fact that a particular member was unable to access a notice of meeting given by this electronic facility will not result in the invalidity of a meeting or any business of the meeting, unless a court declares proceedings of the meeting to be void.

Electronic proxies

Before CLERP 9, the Corporations Act allowed for electronic proxies that could be lodged at an "electronic address". However, a proxy was only valid if it had been "signed". Because "signed" usually refers to handwriting, there were questions about the use of electronic proxies.

CLERP 9 has overcome this problem. Under the Act, the Corporations Regulations have been amended to allow authentication of proxy appointments other than by "signing". An electronic authentication of a proxy must include a method of identifying the member (for example, the member's shareholder number) and an indication of the member's approval of the information communicated (for example, the entering of a confidential personal identification number).

This means that the way is now clear for the lodgment of proxies by email. However, CLERP 9 also lays the groundwork for other types of electronic proxy, Meeting notices sent out after 30 September will be able to specify other methods of electronic proxy lodgment. The legislation tries to avoid being too specific, so that it can accommodate newly-developing electronic systems. It refers simply to:

"other electronic means by which a member may give the company a proxy appointment or proxy appointment authority".

The Corporations Regulations will also specify the time when proxies given by electronic means will be taken to be received by the company for the purposes of any proxy lodgement deadline.

Body corporates as proxies

Members will be able to appoint an individual or a body corporate as a proxy. A body corporate will be able to appoint a representative to exercise the powers that the body corporate may exercise as the member's proxy.