In light of the COVID-19 pandemic (and associated restrictions on gatherings and social distancing requirements), holding general meetings in person has, like other large social events, become very difficult. Many companies are now holding 'hybrid' or 'virtual' general meetings.
As the 2020 AGM season approaches, we answer some of your most frequently-asked questions.
What is the difference between a 'virtual' and 'hybrid' meeting?
A 'hybrid' meeting is one that is conducted at one or more physical locations, with shareholders able to participate in the meeting remotely and vote electronically. A 'virtual' meeting is conducted wholly on-line with there being no one 'place' where the meeting is held.
Apart from some additional practical matters that need to be addressed for a hybrid meeting (i.e. identifying the physical location to be used as the 'hub' of the meeting), there is little practical difference between the two options when it comes to the procedures used to handle communications with shareholders and voting.
Can every company hold a virtual or hybrid general meeting this AGM season?
The prevailing view in Australia is that, subject to the provisions of the company's constitution, hybrid meetings are allowed under the Corporations Act 2001 (Cth) (Corporations Act). Section 249S of the Corporations Act provides that companies may hold a general meeting at two or more locations and use technology to allow the members as a whole a 'reasonable opportunity to participate' remotely.
The legal status of virtual meetings was much more uncertain because of, among other things, a concern that such meetings could not satisfy the requirement for a meeting to occur at a specific 'place' as required by section 249R of the Corporations Act. However, wholly virtual meetings have now been made possible for companies incorporated under the Corporations Act by the temporary relief provided by the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination). The Determination modifies provisions of the Corporations Act in order to enable virtual meetings to be held, provided that certain conditions are satisfied (including that members are given a 'reasonable opportunity to participate' via technology).
This relief (which was originally due to end on 6 November 2020) will now be extended until 21 March 2021 by a further determination – although that determination has not been issued as at the date of this note.
How is voting conducted at a virtual or hybrid AGM?
According to the ASIC guidelines for investor meetings using virtual technology (ASIC Guidance), the requirements for shareholders to be given a 'reasonable opportunity to participate' means that shareholders attending meetings virtually should be provided with an opportunity to participate that is equivalent to the one they would have had if attending in person. That means they should be able to vote, comment and ask questions.
Additionally, voting at a virtual meeting must occur in real-time by poll rather than on a show of hands, recognising the difficulty of voting on a show of hands via technology, and with an ability to lodge a vote in advance of the meeting, where practicable.
How will shareholders ask questions of the board, management and/or the auditor?
As part of the 'reasonable opportunity to participate' requirement, shareholders must be given an opportunity to ask questions in real-time during the course of the meeting, regardless of whether they are participating in person or virtually. This ensures that shareholders are able to comment on and raise questions in response to presentations, debate and other matters arising at the meeting (including consideration of the remuneration report, as well as questions to the auditor).
The Determination allows for shareholder Q&A to occur via technology. This means that, depending on technology used, shareholder questions and comments can be submitted in text-based form and pooled with the assistance of a moderator before being answered. ASIC's view is that any selection process for this should be balanced, representative and transparent (with relevant records to be kept by the company). In our experience, the combination of text-based questions and pooling of similar questions has led to a significantly reduced shareholder Q&A activity at virtual AGMs.
Another implication of virtual/hybrid meetings is that due to the board, management and the auditor not being able to be together in one 'place', companies need to decide who will be answering shareholder questions (for example, the CEO, CFO or Chairperson) to ensure that those persons can be appropriately connected to the meeting. Some companies have also found it useful to run a separate simultaneous chat group or video call for members of the board, management and advisers to assist with the allocation of, and determining responses to, shareholder questions.
What needs to change in the notice of meeting?
There are a number of required changes to the form of notices of meeting that have been used in previous years in order to deal with the hybrid or virtual meeting format and comply with the conditions of the Determination and ASIC's expectations. This includes incorporating clear, concise and effective explanations of:
- how to use the technology to observe, vote, make comments and ask questions; and
- how the reasonable opportunity to vote, comment and ask questions will be provided to those participating virtually.
The Determination also allows for the notice of meeting to be provided in electronic form. Companies looking to take advantage of this might also need to consider whether changes to the format or design of the notice and other documents that are sent to shareholders may be required.
What if there are technological difficulties on the day?
Companies are encouraged to start planning early for holding virtual/hybrid meetings, including discussing with their share registry and legal advisers the available options and practical and legal implications and preparing a detailed meeting script. Once a format and procedure have been settled, it is highly desirable to have one or more 'dry-runs' with the share registry and virtual technology provider to ensure everything goes smoothly on the day.
The ASIC Guidance states that technical issues should be anticipated and planned for in advance of the meeting and communicated to members, and if technical issues result in a number of members being unable to reasonably participate, the meeting should be adjourned until the problem is fixed.