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17 Aug 2020

Virtual shareholder meetings during COVID-19: are they here to stay?

By Liz Humphry and Caitlyn Cooke

We take a look at trends in shareholder meetings as a result of ASIC's determination permitting virtual meetings in response to COVID-19.

In response to the COVID-19 pandemic, Federal and State Government-imposed restrictions on public gatherings and social distancing measures have posed a challenge for companies that are required to hold their Annual General Meetings (AGM) or other shareholder meetings.

In response to this, the Treasurer made temporary modifications in May to the Corporations Act 2001 (Cth) under the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020. These changes came into effect on 6 May 2020.

The determination allows companies to host meetings online and introduces measures to facilitate virtual meetings without being in breach of Corporations Act and constitutional meeting requirements.

Prior to and since the determination came into effect, companies have taken a variety of approaches to holding online meetings, which we have considered further below.

The Determination

In addition to allowing online meetings, the changes:

  • allow quorum to be achieved with shareholders attending online
  • enable electronic delivery of meeting materials like notices
  • require that shareholders are given the opportunity to participate, speak and put questions to board members live during the online meeting
  • require that votes be taken by a poll (and not a show of hands)

These changes will be in effect until 6 November 2020 although, given the continuing situation in Victoria and New South Wales, these changes will likely stay in place for the foreseeable future.

Meeting procedures after the Determination

As the determination permitted virtual meetings, more companies started hosting virtual meetings and AGMs using the online AGM platforms on the market. Many companies have opted to use an online AGM platform to host their meeting as they have built-in voting and question facilities for shareholders to use.  Companies have also recommended shareholders vote via proxy.

QBE held its AGM on May 7 2020, one of the first companies to hold a virtual AGM after the determination was made. Shareholders could proxy vote or vote during the meeting. It used an online platform, which allowed shareholders to ask questions and vote live during the meeting. QBE also gave shareholders the option to teleconference into the meeting. Macquarie Group Limited and Collins Foods Limited are two other companies that elected to hold virtual AGMs, using an AGM platform with in-built voting and question functions.

While an online platform makes it easier for companies to hold their meetings virtually, it is not necessarily needed to comply with the determination. The costs of these platforms are sometimes prohibitive and many companies have elected to bypass the AGM platforms to hold their AGMs virtually.

Predictive Discovery Limited held a general meeting which was broadcast on an online webinar platform. The webinar allowed shareholders to ask questions through a chat function. Shareholders were able to proxy vote or vote during the meeting, if they requested a personalised poll form prior to the meeting.

Geopacific Resource Limited held its AGMs through teleconference. It allowed shareholders to proxy vote or vote during the meeting if they requested a personalised poll form. Holding virtual meetings through teleconference remains a viable option for companies, so long as that format encourages shareholder participation.

The future of shareholder meetings

COVID-19 has necessitated virtual and hybrid shareholder meetings for many companies, particularly in the Eastern states, as a result of social distancing measures. However, as restrictions ease in some States, companies are opting to hold traditional, in-person meetings. This may be due to the cost of virtual platforms, or the technical issues that can occur during online meetings. Several West Australian-based companies have held in-person meetings since late July.

Despite costs and technical issues associated with online meetings, they have the potential to increase shareholder participation. Shareholders that previously would have only been able to proxy vote due to their geographical location, now have the chance to vote and ask questions live. Further, if the Corporations Act is amended to permanently allow electronic delivery of meeting materials, this can reduce costs of shareholder meetings.

As the COVID-19 pandemic continues to worsen in New South Wales and Victoria, it is likely that companies will be holding virtual meetings and AGMs into the future.  However, as with many lessons during learnt during COVID-19, perhaps virtual meetings will become the "new normal".

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Disclaimer

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.