Hybrid and virtual AGMs are here to stay
08 March 2022
With the enactment of the Corporations Amendment (Meetings and Documents) Act 2022 (amending Act), permanent amendments have been made to Australia's Corporations Act 2001 (Cth) to allow companies (and registered schemes) to sign and provide general meeting related documents electronically, and to use virtual meeting technology to hold general meetings, i.e., to hold "hybrid general meetings" and wholly virtual general meetings.
However, as from 1 April 2022, the ability of companies (and registered schemes) to hold wholly virtual general meetings is qualified. A company (or registered scheme) will be able to do so from 1 April only if:
(a) required or permitted by its constitution; or
(b) it is allowed to do so under a determination made by ASIC under s 253TA.
ASIC has the power to make determinations under s 253TA in relation to an entity, or a class of entities, only if ASIC considers that it may be unreasonable to expect the specified entity, or entities in the specified class, to hold meetings wholly or partially at one or more physical venues because of a situation that is beyond the control of the entity, or the entities in the class. On 2 March 2022, ASIC made such a determination (see ASIC Corporations (Virtual-only Meetings) Instrument 2022/129), all listed companies (and registered schemes) will be able to hold virtual-only meetings until 31 May 2022 and, for unlisted companies, until 30 June 2022. In order to rely on this relief, the directors must first pass a resolution to the effect that it would be unreasonable for the company or scheme to hold a physical or hybrid members' meeting, due to the impact of COVID-19. The determination commences on the later of 1 April 2022 and the day after it is registered on the Federal Register of Legislation. (ASIC's announcement about the determination is available here.)
The amending Act also creates a permanent statutory mechanism for the electronic execution of company documents.
Further information about the changes made by the amending Act is set out below.
1. Hybrid and virtual general meetings
As a consequence of the amending Act, Australia's Corporations Act 2001 (Cth) will be amended as from 1 April 2022 to allow companies to hold general meetings at one or more physical venues and using virtual meeting technology (hybrid meetings) and, if required or permitted by the company's constitution, using virtual meeting technology only, and to distribute and execute meeting and certain other documents electronically.
The new rules in the amending Act will from 1 April 2022 replace the current temporary provisions facilitating general meetings using virtual technology and electronic distribution of meeting related materials. The current temporary provisions are set to expire on 31 March 2022.
We have outlined some of the key differences between the current law and the new law which will come into effect as a result of the amending Act, below:
| New law (as from 1 April 2022) | Current law (with current temporary provisions) |
|---|---|
| If the company wishes to hold an entirely virtual meeting, the constitution will need to require or permit this (see new s 249R). Companies without a pre-existing provision to this effect will first need to amend their constitutions if they wish to hold wholly virtual meetings on or after 1 April 2022 (other than as per the ASIC relief mentioned above). | Entirely virtual meetings may be held and there is no requirement for the company's constitution to permit or require this. |
Irrespective of the chosen meeting format, members as a whole must be given a 'reasonable opportunity to participate' in the meeting, including that:
| The same requirements exist currently, save that there is currently no express requirement that the virtual meeting technology used must be reasonable. |
| Members with at least 5% of the votes that may be cast at a members' meeting may request the entity to appoint an independent person to observe the conduct of a poll, or to scrutinise the outcome of a poll, at the meeting and prepare a report on the conduct of the poll (see new ss 253UB – 253UE). | No equivalent under the existing law. |
| Directors' meetings may also be held virtually provided that all of the directors consent (see new 248D). | The same requirements exist currently. |
A move to virtual meetings?
In last year's AGM season, in anticipation of the new rules in the amending Act coming into operation, a number of ASX-listed entities sought to amend their constitutions to provide the entity with the flexibility to hold fully virtual meetings to the extent permitted by the law. However, some proxy advisers published guidelines which recommended against constitutional changes, and some ASX-listed entities withdrew their proposed constitutional amendments to facilitate virtual meetings or failed to achieve the 75% special resolution threshold needed for change. Some others succeeded in changing their constitutions.
Some proxy advisers seemed to be suggesting that directors may seek to avoid questions and scrutiny by holding general meetings using virtual technology only. However, there are provisions in the amending Act which should ensure that directors cannot avoid questions and scrutiny by holding general meetings using virtual technology only, including the abovementioned requirements that:
- the technology used to hold the meeting must be reasonable and allow members, as a whole, to exercise orally and in writing any rights they have to ask questions and make comments; and
- the company appoint an independent person to observe the conduct of a poll, or to scrutinise the outcome of a poll, at the meeting and to prepare a report on the conduct of the poll, if members with at least 5% of the votes that may be cast at a members' meeting so request.
It remains to be seen how often shareholders with at least 5% of voting power will invoke their right to request the appointment of an independent observer or scrutineer.
Distribution of meeting documents
The new provisions in the amending Act relating to the distribution of meeting related documents by companies (and registered schemes) will, as a matter of substance, continue the current rules that are in place. The table below highlights this:
| New law (as from 1 April 2022) | Current law (with current temporary provisions) |
|---|---|
| Members can elect to receive meeting related documents (including notices of meetings) electronically or in hard copy (see new ss 110C, 110D). | The same requirements exist currently. |
| Members will also be able to elect not to receive annual reports or any documents prescribed in the regulations by notifying the entity (see new s 110E). | The same requirements exist currently. |
| Public companies will be obliged to notify members of their right to determine the means by which they receive documents (physical or electronic form) at least once each financial year or make such a notice readily available on a website (see new s 110K). | No equivalent under the existing law. |
| Members may make ad hoc requests to receive a particular document electronically or in physical form (see new s 110J). | There is no specific provision for ad hoc requests under the existing law. |
2. Electronic execution
With effect from 23 February 2022, the amending Act inserts new provisions concerning the electronic execution of documents (including deeds) by companies.
Under these new rules, documents, including deeds and documents which relate to meetings of members, can be signed in electronically (s 110A). The method of signing must:
(a) identify the signatory and indicate the signatory's intention in respect of the information recorded in the document; and
(b) be as reliable as appropriate for the purpose for which the information was recorded in light of all the circumstances, or be proven in fact to have fulfilled the functions described in paragraph (a) by itself or together with further evidence (s 110A(2)).
The amending Act also introduces a new section 126 which clarifies that an individual acting with a company's express or implied authority can execute a document (including a deed) on behalf of the company. Under this new section, an individual can execute a document expressed to be executed as a deed without themselves being appointed by deed and without a witness being required. This applies regardless of whether the document is in physical or electronic form, and delivery of the deed is not required.
We have outlined some of the key differences between the current law and the previous law, below:
| Current law (as from 23 February 2022) | Previous law |
|---|---|
| Split execution is valid (such that different persons can execute different copies of a document) (see new s 110A(4)). | Split execution is possible. |
| Mixed execution is valid (such that one party or director can sign in wet-ink and the other can sign electronically) (see new s 110A(4)). | Mixed execution is possible. |
| The amending Act also permits valid execution by signing of an execution page only (see new s 110A(4)). There is no longer an "entire document" requirement. | The document or counterpart must include the entire contents of the document. |
| Where a person is signing a document in multiple capacities, that person will only need to sign the document once, if the document permits the person to do so and states the different capacities in which the person is signing the document (see new s 110A(5)). | A person signing a document in multiple capacities is able to sign the document once, indicating each capacity in which they sign the document. |
| A company may execute a document as a deed under section 127(1) regardless of whether the document is in physical or electronic form, and without requiring delivery. | Common law rules require that deeds:
|
An individual acting with a company's express or implied authority can execute a document (including a deed) on behalf of the company:
Delivery of the deed is not required (see new s 126). | |
| A proprietary company may execute a document under section 127 if the company has a sole director, who is not also the company secretary (or if the company does not have a company secretary). | A proprietary company may only execute a document under section 127 if the sole director is also the sole company secretary. |
Authors: Robert Hanley, Partner (Legal Governance Advisory); John Sartori, Partner (Ashurst); Maxine Viertmann, Lawyer (Legal Governance Advisory)
