This article was written by Brian Murphy, Yiwen Chen and Amina Karcic
As companies move to holding virtual AGMs this year, one of the benefits we have seen is unprecedented shareholder participation. Normally the preserve of those who can physically attend the appointed capital city CBD meeting place in the middle of a work day, virtual AGMs have allowed shareholders throughout Australia and overseas to participate live in the meeting. And the technology for participating and voting is working.
Another approach which we have seen work to good effect is extending the now usual practice of opening up the polls on all resolutions at the start of the meeting, to opening up questions and comments on all items of business at the same time.
Where a company has written questions received before the meeting, moderated written questions submitted online during the meeting, and live questions on the phone line broadcast to the meeting, the process of stepping through each item overlayed with then dealing with each question medium in turn can be clunky. While a few companies have successfully adopted this meeting procedure of having all questions on all items at the same time for a number of years with physical AGMs, this works particularly well in the virtual meeting environment.
Legal requirements for holding virtual general meetings
In response to the COVID-19 pandemic, on 5 May 2020, the Treasurer issued the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020, to allow the conduct of virtual meetings. On 21 September 2020, the Treasurer issued Corporations (Coronavirus Economic Response) Determination (No. 3) 2020, extending these provisions until 21 March 2021 (the Determination). The Determination relates to both companies and registered schemes and overcomes the previous doubt as to whether the Corporations Act permits general meetings to be conducted solely virtually, and also constitution requirements.
The following requirements must be met for virtual meetings under the Determination:
(i) A vote taken at the meeting must be taken on a poll rather than a show of hands, by using technology to give each person the opportunity to participate in the vote in real time and, where practical, by recording votes ahead of the meeting.
(ii) Notices of meeting must include in the notice itself information about how those entitled to attend can participate in the meeting (including how to participate in a vote and how to speak at the meeting).
(iii) The requirement to allow an opportunity for persons attending the meeting to speak may be complied with by using technology. While a facility allowing moderated written questions submitted online is suitable for this purpose, a number of companies are also providing a teleconference line.
The Determination also overcomes certain general meeting requirements. For example:
- All persons participating in the meeting are taken to be present at the meeting (for example, in respect of quorum requirements and the chair).
- A proxy may be appointed using the technology specified in the notice of meeting.
- Notices of meeting may be given using technology to communicate (i) the details of the notice of meeting or (ii) an online location where the notice of meeting can be viewed.
The Determination modifies the application of the relevant provisions of (i) the constitution of the company or registered scheme, and (ii) the Corporations Act (as well as other ancillary statutory provisions) regulating the conduct of meetings. Accordingly, even if the annual general meeting was not conducted strictly in accordance with the relevant constitution, there would be no recourse under the Corporations Act.
The future of virtual AGMs?
Virtual AGMs are shining the light on the limitations of physical AGMs and there is a strong case for the Determination to be enshrined into the Corporations Act. Companies are looking to whether their constitutions could better provide for virtual or hybrid general meetings. Whatever the outcome of the current pandemic, one appears to be that virtual and hybrid AGMs are the way forward.