This article was written by Miriam Kleiner.
As noted in our alert dated 19 February 2021, the Treasury Laws Amendment (2021 Measures No.1) Bill 2021 ("Bill") was introduced into the House of Representatives on 17 February 2021.
Part of the Bill relates to extending certain determinations made by the Treasurer during 2020 relating to virtual AGMs.
Unfortunately, the determination made by the Treasurer has lapsed, the Bill is languishing in the Senate and is not due to be debated until August. Where does this leave companies who need to hold their AGM between the date of this alert and August (at the earliest)?
Back to the past
Companies who need to conduct general meetings whilst there is no determination on foot (or other law available) will need to do so consistently with pre-COVID-19 AGM rules which generally means:
- a physical in-person meeting must be held or a hybrid AGM using technology to connect people at one or more locations, where permitted by a company's constitution;
- unless direct voting is permitted by the constitution, shareholders attending virtually will not be able to vote using the virtual platform;
- shareholders attending virtually will not be counted for quorum requirements;
- direct voting will only be permitted prior to the meeting where the constitution expressly provides for this; and
- notices of meetings must be hard-copy mailed unless shareholders have opted in to receive electronic communications in accordance with section 249J(3A) of the Corporations Act 2001 (Cth) (Corporations Act).
ASIC has helpfully provided an additional no-action letter which may provide entities with some comfort regarding the holding of hybrid meetings. However, this may not provide much protection against an unhappy shareholder and does not prevent such a shareholder from commencing a Court action.
The ASIC no-action letter provides that:
- hybrid meetings are permitted but entities need to check whether their constitution restricts meetings being held in this way, and if so, need to comply with their constitution; and
- ASIC has adopted a 'no-action' position on non-compliance with provisions of the Corporations Act that may restrict the holding of virtual meetings where an entity elects to hold a meeting using virtual technology. This position applies to meetings held between 21 March 2021 and the earlier of:
- 31 October 2021; and
- the date that any measures are passed by the Parliament relating to the use of virtual technology in meetings of companies or managed investment schemes.
This 'no-action' position on virtual meetings is conditional on:
- the technology or technologies used to hold the meeting providing members as a whole a reasonable opportunity to participate (sections 249S and 252Q). This includes ensuring that members who are participating remotely are able to ask questions and make comments at the meeting;
- voting at the meeting occurring by a poll rather than a show of hands
- each person entitled to vote being given the opportunity to participate in the vote in real time (where practicable voting should also be available in advance of the meeting); and
- the notice of meeting including information about how those entitled to attend can participate in the meeting (including how they can vote, ask questions, make comments or otherwise speak at the meeting to the extent they are entitled to do so).
ASIC has also adopted a 'no-action' position in relation to a contravention of the Corporations Act if an entity sends notice of the meeting, or sends supplementary information in relation to the meeting, using one or more technologies to communicate to those entitled to receive notice of the meeting during the same time period provided the following is complied with:
- Notice of the meeting or supplementary information in relation to the meeting, whether given electronically or otherwise, must either include the contents of the notice or details of an online location where the contents of the notice can be viewed or from where they can be downloaded.
- Where electronic addresses have not been nominated by those entitled to receive notice of the meeting, notice of how to access the contents of the notice must still be given personally or by post.
- Supplementary instructions for on-line participation in the meeting must be given at least two business days before the meeting is held by:
- electronic message (if the member has provided the relevant details);
- a notice on the entity's website; and
- a market announcement if the entity is listed on a market.
This no-action position covers any failure of the supplementary instructions to comply with sections 249J of the Corporations Act.
ASIC has further provided that no-action will be taken against public companies with a financial year end between 7 January 2021 and 7 April 2021 that do not hold their AGMs within five months after the end of the financial years, where these meetings are held up to seven months after year end. However, this does not operate to formally extend the time by which entities must hold their AGM.
What should you do now?
- Check your constitution.
- Don't panic - remember that voting by proxy remains a reliable and effective way for members' votes to be cast and counted where members are unable to attend a general meeting.
Some modern constitutions allow companies to offer direct voting at general meetings. This, in connection with the ability to conduct a livestream of a general meeting with a question facility and the ASIC no-action position, may enable the AGM or EGM to proceed as required if large physical gatherings are prohibited and the company's technology/logistics provider can appropriately accommodate these facilities in a safe, reliable and appropriate way.
- Further, the Court has the power under section 1322(4) of the Corporations Act to postpone, adjourn or cancel a meeting provided that no substantial injustice has been or is likely to be caused to any person. For additional information, please see our alert dated 13 March 2020.
- Consider ASIC's no-action position – if you choose to rely on this, remember that this does not provide protection against an unhappy shareholder and does not prevent such a shareholder from seeking Court relief.