New ASIC guidelines will Australian public companies hold AGMs in light of social distancing requirements and restrictions on indoor gatherings.
Companies with a 31 December balance date may extend the timeframe for holding their AGMs until 31 July 2020.
ASIC will support the holding of AGMs using appropriate technology.
Even if a Company has sent a notice of meeting, it may send members supplementary instructions for online participation in the meeting.
On Friday, 20 March 2020, ASIC released helpful guidelines for upcoming annual general meetings (AGMs) for Australian public companies in the light of the impact of COVID-19, the new social distancing requirements and the restrictions which are now being imposed on indoor non-essential gatherings. This is both in terms of the number of people attending such gatherings and the proximity with which they may be to each other. These Guidelines are particularly relevant for Australian public companies (each, a Company) with a 31 December balance date and that are required to hold their AGM by 31 May 2020 in accordance with the requirements of the Corporations Act 2001 (Cth) (Corporations Act).
In addition to these measures from ASIC, over the weekend the Federal Government announced that the Treasurer will be given a temporary instrument-making power to temporarily amend provisions of the Corporations Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the crisis. It is expected that this new power will be introduced imminently, and may be used to temporarily alter the AGM requirements. The instrument-making power will apply for six months, and any instrument made under the power will apply for up to six months from the date it is made.
Facilitating deferred and virtual AGMs
The Guidelines say that:
There is an extended period in which to hold an AGM: Companies with a 31 December balance date may extend the timeframe for holding their AGMs for two months until 31 July 2020. That is, ASIC will take no action for the breach by such a Company of the requirement in the Corporations Act that its AGM be held by 31 May (being five months after its financial year end) where a company postpones its AGM for two months;
AGMs can use tech: ASIC will support the holding of AGMs using appropriate technology. In this regard:
- ASIC has confirmed that it considers hybrid AGMs (ie AGMs that are held both in person and by way of technology) are permissible under the Corporations Act; and
- While it is unclear whether virtual AGMs are permitted (and whether resolutions passed at virtual AGMs are valid) under the Corporations Act, ASIC has stated that it will take no action against a Company if it holds a virtual AGM.
Supplementary information is allowed: Even if a Company has sent a notice of meeting, it may send members supplementary instructions for online participation in the meeting. ASIC will take no action in respect of any breach of the Corporations Act which arises where a Company has dispatched a notice of meeting in respect of a meeting to be held on or before 31 May 2020 and, at least two business days before the meeting is to be held, the Company sends members supplementary instructions for online participation by way of:
- Electronic message (if the member has provided their relevant details); and
- A notice on the Company's website; and
- A market announcement if the Company is listed.
ASIC's support of the use of appropriate technology remains subject to the requirements in the Corporations Act. The Act requires that a Company ensures that members (as a whole) have a reasonable opportunity to participate in the AGM (e.g. to ask questions of management, auditors etc). As such, Companies considering holding virtual AGMs will need to ensure that the technology used has this functionality. Virtual AGMs will also necessitate the need for voting at AGMs to occur by poll rather than show of hands.
Companies should also consider the provisions of their constitutions and whether they provide the flexibility to hold hybrid / virtual AGMs and, if so, what requirements must be satisfied. In the event that the constitution restricts online participation in an AGM or if a Company cannot otherwise provide effective online participation in an AGM, ASIC has confirmed that a Company may defer holding its AGM to solve such issues and can rely on ASIC's no-action position in respect of the timing required for holding an AGM under the Corporations Act.
Notwithstanding the above, Companies should be mindful that a 'no-action letter' is an expression of ASIC's regulatory intention about how it will exercise its powers and provides an indication as to the future regulatory action that ASIC may take. Such letters do not, however, preclude third parties, including other regulators, government authorities and the courts, from taking legal action in relation to such matters. ASIC does not represent that conduct covered by the no-action letter will not be held to contravene the relevant legislation or that it will intervene in an action brought by third parties in respect of such conduct.
Position for companies with a 31 March or 30 June balance date
ASIC has confirmed that it will continue to monitor its position with respect to the convening and holding of AGMs for Australian public companies with a 31 March or 30 June balance date and will provide further updates in due course.