The Treasury Law Amendments (2021 Measure No. 1) Act 2021 is now in force and, provides companies with much needed certainty for upcoming Annual General Meetings (AGMs) and other general meetings.
The Act amends the Corporations Act 2001 (Cth) to allow companies to use virtual meeting technology to hold a meeting provided that members are given a reasonable opportunity to participate. This includes the ability to verbally speak at the meeting. These new laws will lapse on 1 April 2022 which reflects the fact that they are designed to provide companies with additional flexibility during the COVID-19 pandemic. However, Australian Securities and Investment Commission (ASIC) has been vested with a permanent power to make a determination to allow entities to hold virtual meetings in exceptional circumstances.
The new rules apply to meetings of shareholders (including AGMs and general meetings), meetings of directors and meetings of members of registered schemes. This article outlines in some detail the amendments introduced in the Act as they impact companies convening AGMs and other general meetings.
The Act also introduces amendments to the continuous disclosure obligations and electronic signatures.
Notice of meeting and proxies
If a general meeting is to be held virtually, the notice of meeting must include sufficient information to allow members to participate in the meeting using the technology.
A virtual general meeting must be held at a time that is reasonable at the place where the meeting is taken to be held. Similarly to physical meetings, this does not necessarily mean the virtual meeting must be held at a convenient time for all of the shareholders or members who are attending using technology. The place that a general meeting is taken to be held is:
- the main physical location, if it is a hybrid meeting (ie. members have a choice to attend physically or virtually); or
- the registered office of a company, if it is a wholly virtual meeting.
This ensures that there is only one place and time for the general meeting. These details should also be outlined in the notice of meeting.
Both the notice of meeting and proxy forms for a general meeting may be given to members electronically, or alternatively, sufficient information may be given to members by electronic communication to allow them to access the documents electronically. For example, through providing a link to the documents.
Proxy forms for a general meeting are able to be signed electronically if an appropriate method is used to ensure that the person signing the document is identifiable and their intention to sign the document is indicated and the signed document includes its entire contents.
Conducting a virtual meeting
Virtual meeting technology can be used to hold a general meeting, provided the technology gives persons attending the meeting, as a whole, a reasonable opportunity to participate without being physically present in the same place.
The phrase "as a whole" was specifically introduced to ensure that a meeting would not be invalidated due to the technical difficulties which some individual members will no doubt experience (and which, by now, we are all very familiar with). However, the Explanatory Memorandum for the Bill emphasises that this no member can intentionally be excluded from participation in the meeting.
A resolution put to shareholders at a virtual meeting must be decided on a poll where the company constitution has not excluded the replaceable rules in the Corporations Act. While many companies have excluded the replaceable rules in their constitution, most companies adopt the practice that resolutions at a general meeting are decided on a poll given that in most cases the majority of votes are cast by means of a proxy vote.
Members must be given a reasonable opportunity to participate
A reasonable opportunity to participate at a virtual general meeting includes that a member is given an opportunity to speak orally at the meeting if a member elects to do so. This point is reiterated in the Explanatory Memorandum for the Bill, where it is stated that: "Members also need to be given a reasonable opportunity to speak and verbally ask questions in situations where they have a right to speak and ask questions."
Last year temporary amendments were made to the Corporations Act under the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020. This permitted virtual meetings to be held subject to a number of conditions and authorised "a requirement to allow an opportunity for persons attending the meeting to speak (for example, by asking questions)" to be complied with by using one or more technologies that allowed that opportunity.
During the operation of the 2020 Amendments, many companies adopted a software system provided by their share registry which only permitted members to ask written questions at a general meeting. That practice appears to have been generally accepted at that time. However, this will not be sufficient under these new amendments and companies should be cognisant of this change and ensure that the technology used at meetings appropriately accommodates verbal communication and questioning by the members in attendance.
ASIC power to permit virtual meetings
As mentioned above, the new laws permitting a virtual meeting will lapse on 1 April 2022. In contemplation of the potential for continued uncertainty posed by COVID-19 or other extraordinary circumstances, ASIC has been granted a permanent power to permit entities to hold a wholly virtual meeting.
ASIC may make a determination that an entity or a class of entities can hold a wholly virtual meeting in circumstances where ASIC considers that it would be unreasonable to hold a physical meeting because of situations beyond the control of the entity or entities. Practically, this power will only be exercised after 1 April 2022, when the temporary relief has lapsed.
These amendments are welcomed with open arms as COVID-19 continues to create uncertainty for companies and shareholders. The temporary relief coupled with ASIC's new power to allow virtual meetings in extraordinary circumstances will undoubtedly provide comfort for both companies and their shareholders. However, as we charter into relatively new territory, it is important that companies ensure that the technology used to conduct meetings properly facilitates member participation, in particular providing an opportunity to contribute verbally at meetings.