Last Friday ASIC released “Guidelines for meeting upcoming AGM and financial reporting requirements” (Guidelines), having regard to the impact of COVID-19 on listed and unlisted public companies in satisfying these requirements under the Corporations Act 2001 (Cth) (Corporations Act).
The Guidelines acknowledge that companies with a 31 December 2019 balance date are required to conduct their Annual General Meeting (AGM) by 31 May 2020 and that such companies may require an extension of time to hold the AGM and greater flexibility in how the AGM is conducted.
At this stage the Guidelines do not apply to companies with 31 March or 30 June balance dates; however, ASIC has advised it is carefully monitoring the position and may update its guidance as needed. Further, the Guidelines apply only to AGMs and not to extraordinary general meetings (EGMs).
Key points
For listed and unlisted public companies with 31 December 2019 balance dates that are required to hold an AGM by 31 May 2020, ASIC has:
- confirmed it will take no action if the AGMs are postponed for up to two months, that is, until 31 July 2020;
- said it supports the holding of AGMs using appropriate technology, including a “hybrid” or “virtual” AGM – though the ability to do so will be subject to a company’s constitution; and
- autioned companies against holding an AGM while there are restrictions on large gatherings, unless the company can provide members as a whole with a reasonable opportunity to participate (i.e. through the use of appropriate technology).
At present there is no change to financial reporting deadlines, however ASIC has noted it is monitoring developments that may affect financial reporting.
Hybrid and virtual AGMs
The Corporations Act:
- provides that an AGM or general meeting be held “at a reasonable time and place” (s 249R); and
- expressly permits a company to hold a meeting “at two or more venues using any technology that gives members as a whole a reasonable opportunity to participate” (s 249S).
These are not replaceable rules and are to be considered in conjunction with the company constitution.
The reference to “place” has traditionally been interpreted as referring to a physical location.
In recent years there has been increased interest in the holding of “hybrid” and “virtual” AGMs. Both may be viable options for companies conducting an AGM in the context of restrictions around large gatherings due to COVID-19 or in instances where shareholders are self-isolated or quarantined.
A “hybrid” AGM involves holding the AGM at a physical location, while also allowing shareholders to attend, vote or ask questions online. As the physical meeting is held at a “place”, this is generally considered to satisfy the requirements of the Corporations Act.
A “virtual” AGM is conducted entirely through an online platform. In the past it has been unclear whether this is permitted under the Corporations Act having regard to the requirement to hold the AGM at a “place”. While acknowledging this, ASIC has advised that it will take a “no action” position on non-compliance with provisions of the Corporations Act that may restrict the holding of a virtual AGM (such as s 249S).
ASIC’s no-action position on virtual AGMs is subject to members having a reasonable opportunity as a whole to participate in the AGM. In ASIC’s view, this would include:
- members being able to ask questions of the auditor and about management; and
- voting occurring by a poll rather than a show of hands.
What this means for your company’s AGM
Companies considering holding a hybrid or virtual AGM should first check their constitution to ensure it does not restrict meetings being held in this manner. In particular, for virtual meetings, consideration will need to be given as to whether the constitution permits shareholders attending online to be counted for the purposes of a quorum and whether shareholders are able to vote in some manner online.
Depending on the wording of the constitution, a company can then consider whether to proceed with a hybrid or virtual AGM incorporating appropriate technology. This could be in the form of a livestream or webinar by which shareholders can watch proceedings, submit questions online and participate in a poll. The technology should be on a secure platform with appropriate protocols around shareholder access and verification.
ASIC also encourages the use of proxy voting in conjunction with a hybrid or virtual AGM.
Modern constitutions may also permit direct voting, whereby shareholders can cast their vote through submitting an online or paper form before the meeting.
If the wording of the constitution is restrictive and precludes the holding of a hybrid or virtual AGM, a company can consider whether it can:
- rely on direct voting or promote the use of proxy voting (noting that a quorum and chairperson must still be present for a meeting to proceed); or
- postpone the AGM within the extension period under the Guidelines or its constitution. Notwithstanding the Guidelines, there remains the ability to seek an extension of time from ASIC under the Corporations Act.
It is noted that the Guidelines will not prevent a member from seeking to challenge the validity of a meeting of members. Under section 1322 of the Corporations Act a meeting will not be invalidated for certain irregularities (such as an absence of a quorum), unless a Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by order of the Court. Where a company has concerns about the legality of its AGM being undertaken as a virtual or hybrid meeting, it should seek legal advice.
What this means for your company’s EGM
At present, the Guidelines do not extend to EGMs. If a company has convened an EGM or is proposing to convene an EGM, it should check its constitution to determine whether it is able to hold a hybrid EGM, determine what protocols and systems it can implement for a hybrid or virtual EGM and seek legal advice. Even though the Guidelines do not extend to EGMs it may still be possible to obtain a ‘no action’ letter from ASIC on a case by case basis in respect of a proposed hybrid or virtual EGM in the current circumstances. It may also be possible to postpone an EGM which has already been convened.
Takeaways
- The Guidelines have immediate application for those companies required to hold an AGM by 31 May 2020 and should assess whether to postpone their AGM or hold a hybrid or virtual AGM. ASIC has noted that in circumstances where a notice of meeting has already been dispatched to members, it supports companies sending supplementary instructions to members electronically, on their website and via market announcement (for listed companies).
- Companies holding their AGMs later this year will need to “watch this space”, noting that ASIC has advised it will monitor how market conditions and COVID-19 are affecting financial reporting and AGM obligations for entities with balance dates of 31 March or 30 June. While ASIC has provided companies with much-needed flexibility in the current climate, the ability to hold a hybrid or virtual AGM remains subject to the terms of a company’s constitution.
- Companies who have convened (or are proposing to convene) an EGM will not have the benefit of the Guidelines but may be able to obtain a ‘no action’ letter from ASIC on a case by case basis and should seek legal advice.
If you have any questions about your company’s AGM or EGM, please contact our Corporate Governance and Advisory team.