In the lead-up to AGM season, many companies are looking to maximise shareholder participation and minimise the time and cost involved in holding their AGMs. Increasingly, we are seeing ASX listed companies turn to technology for solutions. This raises the question, can companies hold hybrid or virtual AGMs?
What is a hybrid or virtual AGM?
Virtual: A virtual AGM is a meeting whereby shareholders are given the opportunity to attend the AGM using an online platform which allows shareholders to vote, ask questions and participate electronically in real-time, rather than attend the meeting at a physical venue.
Hybrid: A hybrid AGM shares characteristics of both a traditional and a virtual meeting, allowing shareholders to opt between attending the meeting in person at a physical venue and attending the meeting online.
Are hybrid & virtual AGMs legal?
The general consensus appears to be that hybrid meetings are acceptable under Australian Corporations Law, while the position on virtual-only meetings is less clear.
Section 249S of the Corporations Act expressly allows a company to hold a meeting at two or more venues using any technology that gives members as a whole a reasonable opportunity to participate in the meeting. This provision is generally considered broad enough to accommodate hybrid meetings.
The position relating to virtual-only meetings is less clear because of the language used in the Act, which requires a meeting to be held "at a reasonable time and place" and requires that "place" to be set out in the notice of meeting (sections 249R and 249L of the Corporations Act 2001 (Cth), respectively). Traditionally, the term "place" has been interpreted to mean a physical location. For this reason, some commentators have concluded that the Act does not permit virtual-only meetings. However, the term "place" could arguably be defined with reference to an online location or web address. Alternatively, the term "place" could be more broadly defined to include the physical location of each shareholder participating in the meeting by virtual means. Accordingly, the argument could be made that, provided the virtual platform is sufficient to satisfy all other meeting requirements under the Act, it should not be automatically discounted on the basis of it being virtual-only.
Ultimately, the matter has not yet been tested and given the ambiguity of the language, the legislative position regarding virtual-only meetings remains unclear. In a 2012 discussion paper, the Corporations and Markets Advisory Committee (CAMAC) raised the question of whether legislative amendment was needed to enable shareholders to participate and vote online. However, CAMAC was subsequently dismantled by the Abbott government and, while its responsibilities were handed over to Treasury, no such report has been issued to date.
Have hybrid & virtual AGMs been conducted in practice?
Australian companies are increasingly relying on technology when it comes to general meetings. Live webcasting, electronic voting via handheld devices or smartphone apps and increasing use of electronic polls rather than voting cards, have become frequent features of AGMs in recent years, particularly among large listed companies. However, few have taken the next step of holding hybrid or virtual meetings.
Dual-listed New Zealand companies like Xerox, Spark and A2 Milk, have relied on legislative amendments to the New Zealand Companies Act to hold hybrid or virtual meetings. However, they offer little comfort to Australian companies looking to do the same, due to their foreign exempt listings on the ASX, which relieves them of compliance with certain provisions of the Corporations Act.
A small handful of Australian, ASX listed companies held hybrid AGMs in 2016. The key differences in their approach can be illustrated through two real-life examples, which we refer to below as Company A and Company B. Their experiences provide some guidance for companies looking to hold hybrid meetings in the future.
Company A example
Company A held its first hybrid AGM in November 2016, using proprietary technology which allowed shareholders to participate in person or online by live streaming, voting online and asking questions in real time. Shareholders were given three options:
- to attend in person and vote using a paper ballot;
- to attend in person and vote using the LinkVote app; or
- to attend online and vote using the company's interactive web based technology.
According to post-AGM reports, 34% of the votes were paper based, 50% were cast using the LinkVote app and 16% were submitted online.
While the AGM was a reported success, the following statement in the notice of meeting gave us some cause for concern:
"Shareholders who elect to participate at the AGM using the Company’s online platform instead of attending the physical meeting at the address specified in this notice will not be entitled to the following rights of those shareholders attending the meeting:
- to be counted as attending or being present at the meeting for any purpose, including for the purpose of determining whether a quorum is present at the meeting."
The following questions are raised by such a statement:
- If online participants are not present, how are their votes counted?
- If a resolution is to be passed by a majority of members present and voting, does that preclude online participants, and if so, what is the point of them voting at all?
The Company A notice of meeting therefore raises some interesting questions that companies looking to hold hybrid AGMs will need to consider.
Company B example
In October 2016, Company B hosted an AGM which also allowed shareholders to participate in person and online. While the meeting was held at a physical location, it was also webcast for the benefit of those shareholders unable to attend in person. The webcast was streamed live and made available after the AGM. Shareholders were given the opportunity to raise questions in person at the meeting or in writing prior to the meeting, by either completing a form enclosed with the notice of meeting or submitting those questions online. In its notice of meeting, Company B advised that it may not be able to answer all questions, however it would endeavour to address the more frequently raised matters during the course of the meeting. Shareholders were also given the option of voting in person, by proxy or nominee, directly or online by logging into a Link Market Services web portal using their shareholder number and postcode. It is unclear from the notice of meeting, whether votes could be cast online during the meeting or only before the meeting commenced.
While shareholders participating online were not strictly in attendance at the Company B AGM, the Company B Constitution leaves it open for those online participants to be counted towards those in attendance, by the inclusion of the following words:
"If a separate meeting place is linked to the main place of a general meeting by an instantaneous audio-visual communication device…a member present at the separate meeting place is taken to be present at the general meeting and entitled to exercise all rights as if he or she was present at the main place."
Given the way the law is evolving, companies will need to ensure that their constitutions do not prohibit the holding of hybrid meetings. The clause below is an example of a clause which expressly permits the use of technology to hold a hybrid meeting:
"If a separate meeting place is linked to the main place of a general meeting by an instantaneous audio-visual communication device which, by itself or in conjunction with other arrangements:
- gives the general body of members in the separate meeting place a reasonable opportunity to participate in proceedings in the main place; and
- enables the members in the separate meeting place to vote on a show of hands or on a poll,
a member present at the separate meeting place is taken to be present at the general meeting and entitled to exercise all rights as if he or she was present at the main place…"
Most constitutions include a "direct voting" clause which allows members to deliver votes by non-traditional methods approved by the directors including voting via electronic means. It would be appropriate to amend such clauses so as to make it clear that a person who is exercising a right of direct voting is deemed to be present at the meeting.
When it comes to hybrid and virtual meetings, the law has lagged behind technological developments. We are still yet to see virtual-only meetings held in Australia and while hybrid AGMs are starting to emerge, they have not all been without flaw.
Companies looking to incorporate technology into their AGMs need to make sure that their corporate constitutions permit the use of electronic communication devices and that their online platforms are up to the task.