In our recent article ‘COVID-19: Impacts for general meetings’, we covered the developments in late March 2020 regarding the holding of general meetings during the COVID-19 health emergency.
Further key developments occurred on 5 May 2020, when the Treasurer issued the Corporations (Coronavirus Economic Response) Determination (No.1) 2020 (the ‘Determination’), temporarily allowing companies to hold virtual meetings (including virtual AGMs), and on 13 May 2020 when ASIC updated its ‘no action’ position on AGMs.
Prior to the Treasurer’s Determination, the restrictions of large gatherings imposed in response to COVID-19 were particularly concerning for companies required to hold their AGMs in the near future. The Determination has temporarily relieved this concern by providing clear guidance that meetings held in the 6 months from 5 May 2020 will comply with the requirements the Corporations Act 2001 (Cth) (the ‘Corporations Act’) where they are held using technology.
The Determination allows the quorum requirements for a meeting to be satisfied without physical attendance at a meeting place. By using one or more technologies that give all persons entitled to attend a reasonable opportunity to participate, a person is taken for all purposes to be present at the meeting while so participating, and such person is allowed to use that technology to speak at the meeting. In summary, these modifications allow a meeting to be held remotely online using technology while remaining compliant with the Corporations Act.
The Determination has also addressed the concern surrounding the validity of voting in virtual meetings. Where meetings are held using technology as permitted by the Determination, a vote may be taken at the meeting held using technology, provided that votes must be taken by poll rather than by a show of hands. Votes may also be recorded using technology ahead of time, where it is practical to do so, and members unable to attend a virtual or physical meeting may appoint a proxy using technology.
The Determination also allows a company to provide a notice of the meeting and accompanying materials using one or more technologies. This may be done by providing the notice and accompanying materials electronically or by providing details of an online location where the notice and accompanying materials can be accessed.
A company is entitled to provide notice using these technologies even where it does not have a member’s email address on record. In this case, the company is required to send the member a letter or postcard providing guidance how to access and download the relevant information online.
In order to rely on the Determination to hold a virtual meeting, companies must include in their notice of meeting information about how those entitled to attend can participate at the virtual meeting, including how to appoint a proxy, cast their vote and ask questions. If a notice of meeting was already given before 5 May 2020, a fresh notice with the relevant information must be given at least 7 days before the meeting is held. Also, a duly appointed proxy must be treated in the same way at the meeting as the appointer would be entitled or required to be treated if the appointer attended.
How does the Determination interact with the company’s constitution?
A previous concern with ASIC’s ‘no action’ position with respect to virtual meetings was that it did not overcome any problems associated with restrictions in a company’s constitution in relation to such meetings.
In order to address this, the Determination expressly applies to any provisions of the Corporations Act or regulations that give effect to, or enable the enforcement of, company constitutions. As such, the Determination is expressly intended to affect the operation of a company’s constitution. Whilst this should assist in removing any obstructions in the constitution which may have prevented such meetings, we still recommend the companies check their constitution, including to determine whether there are any additional provisions regarding the use of technology which continue to apply to the extent they are not inconsistent with the Determination.
Extension to AGM deadlines
The Corporations Act requires public companies to hold an AGM within 5 months of the end of its financial year. In late March of this year, ASIC declared a 2 month extension to these deadlines in order to address the difficulties companies face in holding their AGM by this deadline due to the restrictions on large gatherings and travel. On 13 May 2020, ASIC announced this extension now applies to companies with a financial year end from 31 December 2020 to 7 July 2020. Where an extension means a company’s deadline will be in January or February of 2021, ASIC will also take no action against the company for failing to hold the meeting within the calendar year, as is normally required.
Companies should be aware that ASIC’s ‘no action’ position does not prevent a third party such as a shareholder from bringing an action against the company for failing to comply with its constitution. Before choosing to delay an AGM, companies should review their constitution to ensure the extension complies with requirements relating to meetings in its constitution.
For more information or assistance in navigating the impacts of COVID-19 restrictions, please contact James Burchnall.