A brief recap of temporary relief measures now in place and an overview of proposed permanent reforms that if legislated in their current form will permanently enable the use of technology in signing and executing documents and holding meetings
- Temporary relief enabling companies to use technology to meet regulatory requirements under the Corporations Act 2001 (Cth) around convening meetings, distributing meeting related materials and signing/executing documents is now in place until 31 March 2022.
- A Bill proposing to introduce permanent reform - Corporations Amendment (Meetings and Documents) Bill 2021 – is now before parliament. Importantly, the proposed changes are not identical to the temporary measures now in place. It's planned that the permanent changes introduced by the Bill will take effect immediately after temporary relief measures expire.
Despite (generally) broad support for modernising existing requirements in the Corporations Act 2001 (Cth) around execution and signing of documents and convening of meetings, legislating permanent change has proven to be a less than straightforward process. A brief overview of the temporary relief now in place and the Bill now before parliament proposing to introduce permanent reform - Corporations Amendment (Meetings and Documents) Bill 2021 – is below.
Temporary relief is now in place
Schedule 1 to the Treasury Laws Amendment (2021 Measures No.1) Act (TLA 1 Act) commenced on 14 August 2021. Broadly, the changes in Schedule 1 temporarily enable companies to use technology to meet regulatory requirements under the Corporations Act around convening meetings, distributing meeting related materials and signing/executing documents until 31 March 2022.
The temporary measures are similar in substance to the measures contained in the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination No. 3) which expired on 21 March 2021.
Find more detail on the temporary relief currently in place.
More time to hold AGMs
Following the passage of the TLA 1 Act, ASIC's no-action position on virtual meetings ceased to have effect. However, ASIC's no-action position giving companies with balance dates up to 7 July 2021 an additional two months to hold AGMs has not been withdrawn.
In light of ongoing COVID-19 restrictions and uncertainty, ASIC has formalised and added to this by making a legislative instrument - ASIC Corporations (Extension of Time to Hold AGMs) Instrument 2021/770 - giving all public companies with balance dates between 21 February 2021 and 7 July 2021 an additional two months to hold their AGM, and giving public companies limited by guarantee with balance dates between 24 January 2021 and 7 April 2021 an additional four months to hold their AGM.
Legislating permanent change: Bill now before parliament
The government consulted on draft legislation proposing to permanently modernise meeting and execution requirements under the Corporations Act 2001 (Cth) (summarised here) between 25 June to 16 July 2021.
On 30 August 2021, the government released a revised draft Bill – Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments - for another short round of consultation. Consultation closes on 10 September 2021.
On 20 October 2021 a Bill – Corporations Amendment (meetings and Documents) Bill 2021 – was introduced. It appears to be similar in substance to the revised draft Bill.
Importantly, if legislated in its current form, the proposed permanent changes will differ from the temporary measures now in place in several respects.
Meeting requirements/meeting-related communications
Broadly, if legislated in its current form the Bill would permanently:
- Give companies and registered schemes the option to hold hybrid meetings. However, unlike the temporary measures now in place, companies would have the option to hold wholly virtual meetings only if expressly permitted to do so under their constitution. Under the temporary measures introduced by the TLA 1 Act, companies and registered schemes can currently hold wholly virtual meetings of members, regardless of whether they are permitted to do so under their constitutions, until 31 March 2022.
- Allow 'members entitled to attend the meeting, as a whole, a reasonable opportunity to participate in the meeting'. Section 249S of the Bill sets out what this may entail. Among other things, companies will need to:
'allow the members who are entitled to attend the meeting, and do attend the meeting using that virtual meeting technology, as a whole, to exercise orally and in writing [emphasis added] any rights of those members to ask questions and make comments'.
- Give members of companies and registered schemes the option to elect to receive meeting related documents, electronically or in hard copy. Companies and registered schemes will need to notify their members of their right to elect to receive a document or documents in a specified form (physical or electronic form) 'at least' annually. The explanatory memorandum suggests that this could occur by writing to members or by publishing a notice on the company or share registry's website.
- Allow a member or group of members of a company or registered scheme with at least 5% of the voting power to request to have an independent person appointed to observe and/or prepare a report on a poll conducted at a members meeting
- Require votes on resolutions which are set out in the notice of a meeting of members of a listed company or listed registered scheme to be decided by poll (a listed company’s constitution will not be is capable of providing otherwise - the requirement would not be a replaceable rule)
Execution of documents
In respect of execution of company documents the changes would permanently:
- enable companies and their officers (including company agents) to create and sign deeds, as well as other documents, electronically; and
- allow the use of technology to execute documents with a common seal electronically, including by allowing witnesses to validly witness the fixing of a company seal electronically.
- The Bill also proposes to enable proprietary companies with a sole director and no company secretary to use the statutory document execution mechanisms.
Preparing for further 'modernisation' of requirements
The Bill also proposes to move existing provisions relating to electronic communications and electronic signatures from Chapter 2G to Chapter 1 of the Corporations Act 2001 (Cth) 'so that they can be extended in the future to include additional types of documents that do not relate to meetings'.
It's proposed that the permanent measures in the Bill will take effect from 1 April 2022 (ie after the temporary measures in the TLA 1 Act expire on 31 March 2022).
That is, the changes will apply to documents sent and meetings held on or after 1 April 2022 and to documents executed on/after the day after the Bill receives Assent.
This means that even if the Bill is passed, companies and registered schemes that have sent meeting notices before the commencement of the Bill, but after the commencement of the TLA 1 Act, will be able to hold wholly virtual meetings (even if their constitution does not permit them to do so) until the temporary relief in the TLA 1 Act sunsets.