This article was written by Joseph Muraca, Will Heath and Lauren Taylor.
As COVID-19 struck and government responses to it were implemented, arrangements for concerts, sporting events, social functions and other mass gatherings were upended. The AGM has not been immune either, and ASX-listed entities holding AGMs in early 2020 scrambled to make changes to their usual AGM arrangements.
Some clarity came when, on 5 May 2020, the Treasurer used his temporary powers to announce changes to the Corporations Act to facilitate virtual or hybrid meetings and, further, on 6 May, when ASIC published guidance in relation to the Treasurer’s instrument.
The Treasurer’s temporary changes, which expire on 6 November, are likely to still be place for many 30 June financial year-end companies when it comes time to hold their AGMs later in the year. However, some uncertainty regarding the effect of the temporary legislation remains and companies preparing to hold their AGMs over the coming months need to consider what is appropriate for them and be aware of the potential pitfalls.
This note briefly summarises the key implications of the Treasurer’s temporary changes and ASIC’s guidance.
Critically, there is no ‘one-size-fits-all’ solution for upcoming AGMs and your usual KWM contacts would be delighted to discuss the issues with you further.
Some key takeaways are:
- Carefully consider when your AGM will be scheduled: The Treasurer’s temporary changes to the law are scheduled to expire on 6 November, so we are telling ASX-listed clients to carefully consider the timing of their AGM and whether they intend to rely on the temporary law change. We are also advocating directly to the Government and through industry groups for more permanent changes to the law in relation to AGMs and other member meetings.
- Carefully consider how your AGM will be held: It appears to be the intention of the Treasurer’s temporary law changes that companies retain the ability to hold a meeting either in compliance with their constitution or in compliance with the Treasurer’s instrument. In this respect, although ASIC’s guidance encourages companies to hold virtual meetings, each company and its Board should consider their own circumstances and what arrangements will be in the company’s best interests. Companies with forthcoming AGMs should closely consider whether the technological solutions available to them are reliable, costed appropriately, technologically secure (including in relation to data security and privacy), and able to provide shareholders as a whole with a reasonable opportunity to participate in the AGM. Companies should also consider the impact of technological solutions on stakeholder engagement and consider whether moving to a fully virtual AGM is appropriate in their particular circumstances.
- ‘Real-time’ voting sounds neat, but may have unintended consequences: ASIC’s guidance states that shareholders should have the option to cast votes in real time during an AGM via virtual technology. While some real-time voting platforms have already been successfully used in COVID-19 AGMs, they may not be appropriate for all companies. Further, the regulator’s push for companies to use real-time voting has not been the subject of consultation or debate. Companies will need to carefully consider whether, in their own circumstances, technological solutions are available to facilitate real-time voting which is secure, cost-effective and accurate. Additionally, companies and Boards may be rightly concerned that real-time voting may lead to greenmailers and activists holding companies and Boards to ransom.