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Parliament has passed permanent amendments to the Corporations Act relating to the use of technology to hold shareholder meetings under the Corporations Amendment (Meetings and Documents) Act 2022 (the Amending Act). The Amending Act allows companies to hold hybrid meetings, and, if expressly permitted or required by the company's constitution, wholly virtual meetings. The changes will also allow for greater reliance on technology in relation to releasing a notice of meeting to shareholders, voting at meetings and signing meeting-related documents.
The Amending Act makes permanent the temporary provisions introduced in August last year under the Treasury Laws Amendment (2021 Measures No. 1) Act 2021, with some important variations to those rules of which companies and shareholders need to be aware. Equivalent amendments have been made in relation to registered schemes.
Below is an outline of the changes under the Amending Act that will come into effect on 1 April 2002, following the lapse of the temporary provisions on 31 March 2022.
Conducting a shareholder meeting
Companies will be permitted to hold hybrid shareholder meetings (ie., partly physical, partly virtual) and will only be permitted to hold wholly virtual meetings if the company's constitution expressly permits or requires.
The temporary provisions permitted both hybrid and wholly virtual meetings without the need for constitutional authorisation. Although these were sensible in light of the uncertainties created by the shifting COVID-19-related restrictions, shareholders expressed concern that permanently allowing wholly virtual meetings would reduce shareholder engagement and transparency by the company. The requirement in the Amending Act that the constitution must expressly authorise wholly virtual meetings ensures that the decision to permit wholly virtual meetings is left in the hands of shareholders.
A person who attends the meeting (whether at a physical venue or by using virtual meeting technology) is taken for all purposes to be present in person at the meeting while so attending.
A reasonable opportunity to participate
The Amending Act emphasises that shareholders entitled to attend any meeting must be given, as a whole, a reasonable opportunity to participate, including that the meeting is held at a reasonable time and place and that shareholders have the right to elect to ask questions and make comments both orally and in writing. This is particularly important in relation to hybrid and virtual meetings as shareholders have expressed reservations about virtual participation. Companies will need to ensure that the technology used facilitates oral and written engagement, for example, allowing oral questions through a telephone line for shareholders to dial in, or written questions through a live chat function.
It should be noted that the Amending Act does not exhaustively list what constitutes a reasonable opportunity to participate and a court may declare a meeting invalid if there was not a reasonable opportunity to participate and it considers there was or may be a substantial injustice, and that injustice cannot be remedied by any order of the court. Companies should be cognisant of this and proactively assess whether the selected technology is sufficient to conduct a hybrid meeting.
Sending a notice of meeting and proxy forms to shareholders
A notice of meeting, proxy forms or other documents relating to the meeting can be sent to shareholders by sending the document in physical form or, if it is reasonable to expect that the document would be readily accessible and useable for subsequent reference, then the document may be sent by:
- sending sufficient information to the recipient (either in physical or electronic form) to allow the recipient to access the document electronically, or
- sending the document in electronic form by means of an electronic communication, or
- if the document is a financial report, directors report or auditors report, by making the document readily available in electronic form on a website.
The Amending Act contemplates that the methods that a company may send their notice of meeting (or other documents) are not limited to the methods outlined above and states that, "For example, a company's constitution may set out other ways in which a document may be sent".
Under the temporary provisions, documents, including a notice of meeting and proxy forms, could similarly be provided by giving recipients sufficient information to allow them to access the document electronically. We note that some listed companies have relied on these provisions to issue their notice of meeting by sending a letter to shareholders which included a link to their notice of meeting. The Amending Act reinforces the ability to provide documents in this way and we can expect that companies will continue to embrace the efficiencies that electronic communication provides to both the company and to shareholders.
Companies should also be aware that if a notice of meeting is issued before the commencement of the Amending Act and the meeting is yet to be held, the Amending Act will still apply to the meeting.
Members' right to elect how documents are sent
If a shareholder does not want to be sent documents in electronic form, they may elect to receive the document physically. A company must notify its members of their right to elect how to receive documents from the company; there are various strict liability offences for failing to comply with a shareholder's election.
E-signing
A person may sign a document relating to a meeting, including a proxy form, by signing an electronic form of the document using an electronic means if the method identifies the person, indicates the person’s intention in respect of the information recorded in the document and is reliable as appropriate for the purposes for which the information was recorded.
Voting
A resolution may be decided on a show of hands unless a poll is demanded. For listed companies, a poll is required if the notice of meeting sets out an intention to propose the resolution to be decided on a poll and stated the resolution, the company gave notice of the resolution in response to a member's request for the company to put the resolution to the meeting or if a poll is demanded. This rule for listed companies applies despite anything in the company's constitution.
The Amending Act intentionally does not specify the particular way in which a show of hands or a poll is to be conducted to allow companies flexibility to conduct voting in the manner best suited to the particular circumstances of the company. The Chair is to determine how this will be conducted.
Members of a listed company with at least 5% of the votes that may be cast at the meeting may request the company to appoint an independent person to observe the conduct of the poll or to scrutinise the outcome of a poll at a meeting, and in either case, prepare a report with respect to the same.
Reviewing the new company meetings laws
A review of the operation of the Amending Act must be conducted no later than the earliest practicable day after the end of two years after the commencement of the Amending Act. To the extent that the review relates to the provisions permitting hybrid and virtual meetings, the review must be conducted by an independent panel.
A report must be developed about the review and tabled to Parliament. If a report on the review of the sections permitting wholly virtual meetings is not brought before Parliament within 30 months of the commencement of the Amending Act, those sections will cease to apply to future meetings.
Extension of temporary relief
ASIC has granted relief under the ASIC Corporations (Virtual-only Meetings) Instrument 2022/129 which allows companies and registered schemes to hold virtual-only meetings of their members for an additional two months until 31 May 2022 (in the case of listed companies, and listed and unlisted registered schemes), or three months until 30 June 2022 (in the case of unlisted companies), beyond the expiry of the current temporary relief measures introduced by the Treasury Laws Amendment (2021 Measures No. 1) Act 2021. The relief is provided on the condition that the directors of a company or responsible entity of a registered scheme first pass a resolution that, in the opinion of the directors voting for the resolution, it would be unreasonable for the company or registered scheme to hold a meeting of its members, wholly or partially, at one or more physical venues due to the impact of the COVID-19 pandemic.
Further changes are on the horizon
The Treasury Laws Amendment (Modernising Business Communications) Bill 2022 intends to develop on the changes made under the Amending Act. If passed, this would significantly broaden the scope of the provisions relating to e-signing, sending documents electronically and the use of technology generally, for example, in relation to off-market takeovers.
The Bill was introduced into Parliament on 17 February 2022 and is awaiting further debate by Parliament. We will provide updates on any developments in relation to the progress of the Further Amending Bill and the implications of those developments for companies.
Key takeaways for companies
The Amending Act introduces some welcome changes and grants companies flexibility to rely on technology while ensuring that all meeting-related obligations are observed. Hybrid meetings are now permitted and although it remains to be seen what major companies will do, there are clear attractions to holding hybrid meetings, including reduced business costs and better engagement and communication with shareholders. In any case, companies must ensure that in all meetings, shareholders are given a reasonable opportunity to participate by asking questions orally and in writing. It is important that shareholders are receiving documents in their elected form and can readily access them and that all other meeting obligations are being satisfied.
While the changes are welcome and certainly a reflection of the community's shift towards increased reliance on technology in everyday life, particularly in response to COVID-19, it is important that companies are prepared and proactive, particularly in light of the potential for further changes.