On 5 May 2020 the Federal Treasurer issued a Determination modifying the operation of provisions of the Corporations Act, the Corporations Regulations, the Insolvency Practice Rules, and the Passport Rules in respect of:
- notice and conduct of meetings (including the operation of constitutions, registered schemes and any other arrangement that requires or permits a meeting to be held, or regulates the conduct of a meeting); and
- providing practical relief for the requirement of companies executing documents under section 127(1) of the Corporations Act.
Company meetings – use of electronic technology
The Determination ensures that companies and other entities that are required to or wish to hold a meeting, such as an Annual General Meeting (AGM), may do so using technology rather than face-to-face meetings. The Determination also:
- enables a quorum, votes, notices and the asking of questions to be facilitated electronically; and
- permits information required for the meeting to be circulated and accessed electronically.
The purpose of the Determination is to give companies, responsible entities, external administrators and other classes of persons short term relief to facilitate continuity of business and provide certainty about how they can meet their legal obligations for the next six months.
To give relief during the pandemic, the Determination modifies the rules in respect of meetings as follows:
- Holding of meeting – a meeting may be held using one or more technologies that give all persons entitled to attend a reasonable opportunity to participate without being physically present in the same place (and the following modifications apply if the meeting is held in that way);
- Participation – all persons so participating in the meeting are taken for all purposes (eg a quorum requirement) to be present at the meeting while so participating;
- Voting by poll – a vote taken at the meeting must be taken on a poll, and not on a show of hands, by using one or more technologies, to give each participant the opportunity to vote in real time and, where practicable, by recording their vote in advance of the meeting;
- Attendees able to speak – a requirement to allow an opportunity for persons attending the meeting to speak (eg to ask questions) may be complied with by using one or more technologies that allow that opportunity;
- Proxies – a proxy may be appointed using one or more technologies specified in the notice of the meeting;
- Notices – a notice of a meeting may be given, and any other information to be provided with the notice, or at or in relation to a meeting, may be provided, using one or more technologies to communicate to those entitled to receive notice of the meeting:
- the contents of the notice and the other information; or
- details of an online location where the notice and other information can be viewed or from where they can be downloaded.
The Determination expressly contemplates notice of a meeting and relevant material, and links to notices and materials being viewed or downloaded, and being sent by email.
LSL Tip – We suggest that retaining records and logs of notices sent, attendees at meeting, questions asked, and votes taken will better prepare the company to record its compliance with this relief and mitigate the risk of shareholders raising concerns around procedural and conduct matters.
Modifications are subject to the following conditions
For the entity to benefit from the modifications, the following conditions apply:
- Notice of meeting must include – the person giving notice of a meeting that is held using technology must include in the notice information about how those entitled to attend can participate in the meeting (including how to vote and speak at the meeting, to the extent they are entitled to do so);
- Permitted to send fresh notice – if notice of the meeting has already been given, then at least seven days before the meeting is held, fresh notice of the meeting may be given setting out the technology related information above;
- Proxy to be treated in the same way as appointor – the person conducting the meeting must treat a duly appointed proxy in the same way as the appointor (of the proxy) would be entitled or required to be treated if he or she attended the meeting in person.
Execution of company documents
The Determination alters the operation of section 127 of the Corporations Act to give certainty that when company officers sign a document electronically (including an electronic document), the document has been validly executed.
Under the Determination, during the relief period a company may also execute a document by:
- two directors, a director and secretary or the sole director/secretary signing a copy or counterpart of the entire contents of the document that is in a physical form (and that need not include the signature of another person who is to sign the document); or
- electronic communication (within the meaning of the Electronic Transactions Act 1999 (Cth)) if:
- (a) a method is used to identify the person in the electronic communication and to indicate the person’s intention in respect of the contents of the document; and (b) the method:
- is as reliable as appropriate for the purpose for which the company is executing the document, in light of all the circumstances, including any relevant agreement; or
- is proven in fact to have fulfilled the functions described in (a) above, by itself or together with further evidence.
The Determination also modifies the operation of section 129(5), which sets out the assumptions that a person may make that a document has been signed in accordance with section 127(1), so that it includes signing in accordance with this Determination.
Period of relief
The Determination has effect for six months and will be repealed on 6 November 2020.