Update: AGMs under the spotlight

AGMs have been very much front of mind over recent weeks.

Governance Institute of Australia, Australasian Investor Relations Association and the Business Law Section of the Law Council of Australia issued a guidance on the impact of COVID-19 on AGMs on 20 March 2020.

The guidance responded to ASIC’s ‘no-action’ position of the same date that allowed companies with a 31 December balance date to conduct an online AGM or hold an AGM up to two months past the prescribed deadline.

ASIC amended its ‘no action’ position on 13 May to give public companies with financial years ending up to 7 July 2020 an extra two months in which to hold their AGM.

The Treasurer made the Corporations (Coronavirus Economic Response) Determination (No 1) 2020 on 6 May 2020 (the Determination). The Determination allows companies and other entities that are required or wish to hold a meeting, such as an AGM, to do so using technology rather than face to face meetings while public health restrictions are in place

The Determination will be in effect up to and including 5 November 2020 and allows AGMs and all other meetings under the Corporations Act including general meetings and creditors meetings to be held online. The Determination overcomes the issue of companies not being able to hold legally valid online or virtual meetings due to their constitutions as well as the doubt surrounding their legality under the Corporations Act.

The Determination provides:

Use of technology

Companies can now hold virtual meetings, instead of in person, using one or more technologies that give all persons entitled to attend a reasonable opportunity to participate without being physically present in the same place.

Quorum

The requirement for physical attendance for purposes such as achieving a quorum may be met using technology. All persons participating in the meeting will be taken to be present at the meeting.

Participation

Requirements allowing those attending the meeting to speak (for example, by asking questions) can now be satisfied by using technology. A proxy may also be appointed using one or more technologies specified in the notice of meeting.

Poll voting

Votes must be taken by a poll and each person entitled to vote must be given the opportunity to vote in real time and, if practicable, ahead of the meeting. A show of hands may not be used where a meeting is being facilitated using technology.

Notices of meeting

• Notices of meeting can be sent to shareholders using one or more technologies, including where shareholders have not provided an email address. In this case, a company would meet the requirement to give notice and provide documents (such as various reports or resolutions to be put to the meeting) through a letter or postcard setting out where the shareholder can view the information online and download it.
• For example, where a company holds email addresses for only some shareholders, it can send those shareholders an email setting out or attaching a notice of meeting, and other material relating to the meeting or providing a link to where the notice and other material can be viewed or downloaded. Where the company does not hold an email address for a shareholder it can send a letter or postcard setting out a URL for viewing or downloading the notice and other material.
• Companies must include the following information in their notice of meeting:

– how shareholders can participate in the meeting (including by proxy)
– how participants can vote and ask questions
– any other information shareholders need to know to participate using technology.

If a company has already sent out a notice of an AGM prior to 6 May 2020, it must issue another notice at least seven days before the meeting with information about how to participate in the meeting electronically.

A company must treat a proxy in the same way the shareholder who appointed the proxy would be treated if the shareholder was attending the meeting.

ASIC guidelines for investor meetings using virtual technology

ASIC issued guidelines for investor meetings using virtual technology on 6 May 2020 to ensure that meetings using technology are conducted in a meaningful and effective way that provides a reasonable opportunity for members to participate. If you are planning to hold an AGM or other shareholder meeting you are encouraged to read ASIC’s guidelines here.

ASIC’s guidelines are based on the Determination and will remain in place until the Determination expires at the end of 5 November 2020, unless it is withdrawn or reissued beforehand.

Given the current restrictions on shareholders’ ability to physically attend meetings, ASIC has stated that it would be concerned if a company were to seek to hold a physical meeting or a hybrid meeting that did not adequately allow shareholders to ask questions and cast votes at the meeting in a way that provides them with a reasonable opportunity to participate effectively. Companies that hold meetings in circumstances that do not allow ‘effective participation’ risk breaching sections 249R or 252P of the Corporations Act (the requirement to hold a meeting at a reasonable time and place), or the terms of the Determination.

While restrictions on movement and large gatherings remain in place, ASIC strongly encourages companies to hold either:

• ‘virtual’ meetings (a meeting where all shareholders participate online) where circumstances permit, or
• ‘hybrid’ meetings (a small physical meeting linked with online facilities that allow remote participation).

The guidelines set out ASIC’s views on the most appropriate approach to conducting hybrid and virtual meetings as well as the legal requirements under the Determination.

The guidelines cover the following matters that are relevant to AGMs:

Shareholder participation during hybrid and virtual meetings

• As an overall guiding principle, shareholders at a hybrid or virtual meeting should be given an opportunity to participate in the meeting that is equivalent to the one they would have had if attending in person. This generally means:
• The technology used should enable those participating virtually to follow the proceedings of the meeting uninterrupted.
• Any changes to the way the meeting is conducted to account for the virtual environment should be tailored, as far as possible, to preserve and promote genuine and effective interaction between shareholders and the board.
• Shareholders should be given a reasonable opportunity to ask questions live during the course of the meeting regardless of whether they are participating in person or virtually. This ensures they are able to comment on, and raise questions in response to, presentations, debate and other matters arising at the meeting. At AGMs, a similar opportunity should be extended for questions about, or comments on, the management of the company and (where applicable) the remuneration report, as well as questions to the auditor (see sections 250S, 250SA and 250T of the Corporations Act).
• If technology (or any other process adopted) enables a company to review and select members’ questions or comments submitted in advance of, and/or at, the meeting, the selection process should be balanced and representative. There should also be transparency about the number and nature of the questions asked and not answered – and appropriate records of questions, comments and responses should be kept to enable this.
• Shareholders entitled to vote on resolutions put at the meeting should have the opportunity to consider responses to questions and debate before doing so. This will support shareholders making a fully informed decision. Shareholders should therefore have the option to cast a vote live during the meeting via technology in the same way that they would if they attended in person. This is so even where the option to vote prior to the meeting is also available (see also Determination paragraph 5(1)(c)).

Voting in a hybrid or virtual meeting

• All voting at a virtual or hybrid meeting should be by a poll rather than a show of hands. Voting by a show of hands has the potential to disenfranchise shareholders. This potential is even greater in a virtual setting (see Determination paragraph 5(1)(c)).
• Where practicable, voting online or by other means should also be available prior to the meeting for the convenience of shareholders who do not otherwise intend to participate (see Determination paragraph 5(1)(c)).

Content of the notice-of-meeting

• Many virtual attendees may be using new technology for the first time. The notice-of-meeting should include clear explanations of:

– how to use the technology to observe, vote, make comments and ask questions

– how the reasonable opportunity to vote, comment and ask questions will be provided to those participating virtually.

• The explanations should be clear, concise and effective (section s249L(3) of the Corporations Act).
• At the very least, companies should specify an email address (or other online submission facility) in the notice of meeting for the service of proxy appointments and proxy appointment authorities.

Technical problems during a hybrid or virtual meeting

• Technology can be unpredictable and can present new risks to the proper functioning of meetings. Planning ahead will mitigate these risks and improve user experience.
• ASIC encourages companies to:

– assess virtual technologies in advance of the meeting. Consider whether the technology adequately facilitates shareholder participation and can handle anticipated usage. Also consider holding a short rehearsal to iron-out potential complications or technical issues.

– consider backup solutions and plans to overcome technical issues. Plan for how you might communicate in real-time to shareholders participating virtually to provide new instructions or a change in plans. Let participants know at the beginning of the meeting how you will communicate these updates if technical issues do arise.

– if technical issues result in a number of shareholders being unable to reasonably participate, the meeting should be adjourned until the problem is fixed. An extension to a statutory timeframe may be required to facilitate this. In the case of AGMs required to be held before 31 May 2020, a company or responsible entity may rely on ASIC’s ‘no action’ position.

ACNC regulated charities

At our recent Governance and Risk Management Forum, ACNC Commissioner, Dr Gary Johns, encouraged ACNC regulated charities wanting to hold their AGM to hold virtual or online meetings.