Last week the Federal Government released a draft exposure bill, Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments (the new Bill), which is intended to provide much needed clarity for entities in relation to the holding and convening of virtual shareholder meetings and execution of documents. However, there will likely be some challenges in its implementation.
What does the new Bill do?
The new Bill is intended to amend a bill that was first introduced in February this year and is yet to pass through the Senate. The Treasury Law Amendments (2021 Measure No. 1) Bill 2021 (the earlier Bill), which (amongst other things) permits wholly virtual meetings and e-signing of documents until 16 September 2021.
Specifically, the new Bill proposes to:
- permit the holding and convening of hybrid meetings (i.e. meeting at physical venue(s) and using virtual meeting technology) and, if expressly permitted by the company or scheme constitution, wholly virtual meetings (see section 249R and 252P);
- clarify how the general test for a reasonable opportunity to participate in a members’ meeting applies across different meeting types, including hybrid and wholly virtual meetings (see section 249S and 252Q);
- makes voting by a show of hands the default method for voting for hybrid meetings (see sections 250J(1) and 253J(2));
- permanently allow any document that relates to a meeting to be given and signed electronically (see section 1679F);
- grant security holders with more than 5% of the voting power the right to request an independent person to observe or report on a poll (see sections 253V, 253VA, 253W and 253WA); and
- allow a sole director of a proprietary company that has no company secretary to validly execute documents and allow third parties to make a statutory assumption about the valid execution of the document by the company in those circumstances (see sections 127(1)(c), 127(2)(c), 129(5) and 129(6)). (We add that this adopts the point we made in our submission to Treasury last year in relation to a related Bill).
How does the new Bill work?
The new Bill assumes that the earlier Bill will be passed prior to the new Bill's enactment. However, debate of the earlier Bill has been deferred until August 2021 as, although there is general support for the virtual meetings and e-signatures amendments, the Bill also proposed changes to continuous disclosure obligations which have been resisted.
It is therefore likely that the new Bill will not be passed until the earlier Bill has been debated. Curiously, paragraph 1.63 of the explanatory memorandum to the new Bill contemplates that it may still be passed if the earlier Bill fails to progress through parliament. This seems to cast some uncertainty on the progression of the new Bill.
Further, the earlier Bill is temporary in nature, expiring on 16 September 2021. Paragraph 1.62 of the explanatory memorandum to the new Bill contemplates that if the new Bill is passed prior to 16 September then the earlier Bill still operates to permit wholly virtual meetings held before that date. This provides certainty for many companies, however, those holding AGMs after 16 September are left in the dark.
Interestingly, the Senate Economics References Committee released a report this week on the earlier Bill, in which it recommended that a separate bill is created such that the continuous disclosure amendments are dealt with separately to those related to virtual meetings and e-signatures. If adopted, this recommendation will, in theory, fast-track the progression of the earlier Bill as it relates to virtual meetings and e-signatures. This will presumably also have the consequence of fast-tracking the progression of the new Bill. The Committee also recommended that the government extend the expiration date of the virtual meetings and e-signatures provisions by six months to provide certainty for entities in regard to forthcoming AGMs and as COVID-19 continues to disrupt normality
What now
This new Bill, if enacted, will certainly provide much needed clarity on the position in relation to hybrid meetings and wholly virtual meetings and seems to appropriately respond to the general shift towards a greater reliance on technology in response to COVID-19.
Undoubtedly there will be developments to remedy the remaining uncertainties in relation to the implementation of the new Bill and its relationship with the earlier Bill. We will be monitoring this closely and further updates will be provided as necessary.