Virtual shareholder meetings
20 August 2021
20 August 2021
Since the temporary measures introduced in May last year in response to the Coronavirus pandemic permitting Australian companies to hold virtual general meetings expired on 21 March 2021, there has been doubt about the legal efficacy of virtual general meetings of companies. The amendments made by the Amending Act remove the doubts. The amendments facilitate the use of electronic means to hold meetings. The amendments are broadly consistent with the temporary measures that expired in March this year.
Accordingly, meetings may now be held by:
These new provisions apply to meetings of members of companies, directors of companies and members of registered schemes. They apply until 31 March 2022.
The Amending Act has made numerous detailed amendments to the Corporations Act for this purpose. Broadly speaking, the amendments provided that:
The Amending Act has also made amendments allowing documents relating to meetings to be given or signed using electronic means. These amendments apply regardless of whether the meeting is held using electronic technology or in person.
There are broadly two conditions that must be satisfied before a document can be given electronically. The first condition is, unsurprisingly, that it must be reasonable to expect that the document would be readily accessible so as to be useable for subsequent reference at the time that the document is given.
The second condition is that an election by the recipient to receive documents in hard copy only is not in force. Members may elect to receive documents in hard copy. There is no requirement for the company to notify members of their right to “opt-in” to receiving hard copies of documents relating to meetings.
The amendments also provide that information may be recorded electronically in a minute book if at the time of recording the information it is reasonable to expect that the information would be readily accessible so as to be usable for subsequent reference. They also allow minute books to be kept electronically if the method used to keep the minute book provides a reliable means of maintaining the integrity of the information and it was, at the time of generating the electronic minute book, reasonable to expect that the information would be readily accessible so as to be usable for subsequent reference. If stored electronically, the minute book must be open for inspection at the same place where a hard copy would have been required to be retained under the Act.
The new rules will also apply to meetings of members of registered schemes.
As the rules are facilitative in nature, they will not preclude meetings being held using traditional means or by hybrid means.
The provisions of the Amending Act facilitating virtual meetings are temporary only. The provisions will cease to apply on 31 March 2022. According to the Explanatory Memorandum, these temporary amendments are designed to provide companies with additional flexibility during the Coronavirus pandemic, and the Government is finalising permanent meetings with a view to the reforms being in place prior to the relief provided by Amending Bill ending.
The Amending Act has also provided emergency relief powers for ASIC to:
These powers may only be exercised if it may be unreasonable to expect the entities or the class of entities to comply with the law due to circumstances beyond their control, such as those caused by COVID-19. Instruments made under the power cannot be in place for longer than 12 months.
The grant of these additional powers to ASIC is not subject to the 31 March 2022 sunset date – they are permanent amendments.
As has been well publicised in the media (including by the Federal Treasurer himself in an article published in the Australian Financial Review on 12 August 2021), the Amending Act also provides that all civil penalty proceedings commenced under the continuous disclosure must prove that an entity or officer acted with ‘knowledge, recklessness or negligence’ in respect of an alleged contravention. Similarly, for entities and officers to be liable for misleading and deceptive conduct in circumstances where the continuous disclosure obligations have been contravened, this requisite mental element must be proven. These changes effectively make permanent (subject to an independent review being conducted in two years' time) the temporary changes to the continuous disclosure laws which were introduced last year in response to the Coronavirus pandemic and expired in March this year.
Authors: John Sartori, Partner; Oscar Doupe-Watt, Graduate.