7 months after being introduced in Parliament, the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Amendment Act) has been passed1, allowing companies to convene virtual general meetings up to 31 March 2022.
This is a welcome development for all companies planning for this upcoming annual general meeting season, but it is important to be mindful of new functionality requirements for virtual meeting platforms.
What was the situation previously?
Previously, section 249S of the Corporations Act 2001 (Cth) (Corporations Act) permitted shareholders meetings to be held at “two or more venues using any technology”, provided that members as a whole were given a reasonable opportunity to participate. It was generally accepted that the provision permitted hybrid meetings, that is a shareholders meeting conducted in several venues, by way of audio and visual link up, but did not permit wholly virtual meetings without any physical “venue”. This section has been repealed by the Amendment Act.
During the COVID-19 pandemic, determinations2 were made by the Treasurer to modify the operation of the Corporations Act, to allow companies to hold virtual general meetings, including annual general meetings (AGMs), and provide notices of meeting electronically (amongst other things).
However, the Treasurer’s temporary powers3 to make such legislative instruments (which were for a maximum period of 6 months) expired on 24 September 2020, and as a result, the Treasurer was unable to permit the holding of virtual general meetings after 21 March 2021. This and the delay in the passing of the Amendment Act left a legislative gap. In response to this and the COVID-19 restrictions impacting the ability to hold physical and hybrid meetings, ASIC issued a ‘no action’ position on virtual meetings so long as certain conditions were met. However, despite the ‘no action’ position from ASIC, companies still faced other risks, including challenges to the validity of resolutions passed, if they held a virtual AGM.
What does the Amendment Act mean for AGMs?
The Amendment Act allows shareholders meetings (and also meetings of members of registered schemes, and board meetings) to be held wholly virtually. It also confirms the ability of companies to hold meetings in person at different locations connected virtually.
The final Amendment Act as passed by both houses of Parliament is substantially similar to the Bill as originally proposed, the key provisions of which were discussed in our previous article. There are however a few important aspects which the Amendment Act has charged since our February article, specifically:
- the temporary relief allowing the holding of virtual meetings will now end on 31 March 2022 (instead of 15 September 2021);
- companies will not be required to notify members of their right to elect to receive hard copies of general meeting documents (whereas the Bill, as introduced, required companies to notify all members of this right within 2 months of commencement of the Bill and imposed an ongoing obligation to notify new members of this right); and
- ASIC will now have permanent emergency powers to:
- extend the timeframe for companies to hold an AGM on a class order basis;
- allow companies to hold a wholly virtual meeting even after the expiration of temporary relief in the Amendment Act; and
- allow ASIC to modify the manner or timeframe in which general meeting documents must be given under the Corporations Act.
ASIC have exercised their powers and extended the period of time public companies must hold their AGM. This is discussed below.
What are the new requirements?
Last year many companies held wholly virtual AGMs under the temporary determinations made by the Treasurer4. The determinations set out some conditions to holding a virtual meeting.
The Amendment Act has more detailed conditions that all companies should be mindful of when planning a virtual AGM.
(a) Place and time of meeting
For virtual meetings, the place of the meeting is the registered office of the company and the time of the meeting is the time at that address. For hybrid meetings, the place of the meeting is the main location where the meeting is held (as required to be set out in the notice of meeting) and the time of the meeting is the time at that address.
(b) Notices of meeting can be given electronically
Notices of meeting and related documents (e.g., notices of resolution, proxy documents) can be given electronically by:
- giving the document to a person by means of an electronic communication (e.g., email); or
- giving the recipient sufficient information to allow the recipient to access the document electronically (e.g., a card or email with a link to a website).
Shareholders may elect to receive such documents in hard copy. If a shareholder has elected to receive hard copy documents, the company cannot send notices of meeting to them electronically. As mentioned above, there is no requirement on the company to notify shareholders of their right to elect to receive hard copies.
(c) Contents of notices of meeting
For virtual meetings and hybrid meetings, there must be:
- sufficient information in the notice of meeting to allow members to participate using technology (i.e. dial-in details or link to meeting hosting website, and date and time of the meeting); and
- sufficient information to allow members to provide proxy documents by electronic means.
Additionally, for hybrid meetings, the notice of meeting must contain the date and time for the meeting at each location, and the main location for the meeting.
(d) Voting by poll and in real time
Under the new section 250J(1) of the Corporations Act, any shareholder meeting held using virtual meeting technology (whether that be a hybrid or wholly virtual meeting) must conduct voting by way of a poll. However, this is a replaceable rule, so companies can modify this in their constitution (although it is considered best practice for listed companies to conduct voting by poll).
Additionally, the new section 253Q(4) of the Corporations Act requires a virtual meeting to enable all meeting participants who are entitled to vote to have the opportunity to vote in real time. Shareholders may also be given the opportunity to record a vote in advance of the meeting.
(e) Questions can be asked orally and in writing
The new section 253Q of the Corporations Act requires a virtual general meeting to provide shareholders with a reasonable opportunity to participate in the meeting, which includes a reasonable opportunity to exercise a right to speak at the meeting. Importantly, shareholders must have the right to speak (i.e. ask questions and make comments) orally, rather than just in writing. Virtual meeting platforms will need to have the functionality to enable this to occur.
(f) Tabling of documents
At a hybrid or virtual meeting, a document is tabled at the meeting if it is given to members before the meeting or made accessible during the meeting. This can include screen sharing facilities for virtual attendees and hard copies for physical attendees.
What other changes are there?
The Amendment Act also amends the Corporations Act to:
- permit the electronic signing of documents by companies under section 127 of the Corporations Act; and
- establish a ‘fault-based’ continuous disclosure framework whereby failures to disclose market-sensitive information will only be actionable if the company acted with knowledge, recklessness or negligence in withholding the information.
When is an AGM required to be held?
Under section 250N of the Corporations Act, public companies are required to hold an AGM at least once each calendar year, and within 5 months after the end of its financial year.
ASIC have extended the period of time for companies to hold their 2021 AGMs through the ASIC Corporations (Extension of Time to Hold AGM) Instrument 2021/770 (ASIC Instrument), with the effect that:
- public companies (other than companies limited by guarantee) with a financial year ending on a date between 21 February 2021 and 7 July 2021 have an additional 2 months to hold their AGM; and
- public companies limited by guarantee with a financial year ending on a date between 24 January 2021 and 7 April 2021 have an additional 4 months to hold their AGM.
The ASIC Instrument does not change the timeframe within which companies must complete and provide copies of their financial reports to members.
What happens after 31 March 2022?
The Treasurer has released an exposure draft of a bill that will permanently change the Corporations Act to allow virtual meetings. It is expected that the bill will be considered by the Australian Parliament later in 20215.
The current form of the exposure draft, if passed, will only permit companies to conduct virtual meetings if required or permitted under their constitutions. If your company constitution does not currently expressly permit virtual meetings, it may be timely to amend the constitution during this 2021 AGM season, by passing a special resolution to include provisions to enable the conduct of virtual meetings.