The measures introduced by the Federal Government in May to provide for the electronic execution of documents and virtual meetings in response to the COVID-19 pandemic have been a useful reform.
But the speed of the changes has made it challenging at times for organisations to clearly understand the implications for legal and regulatory compliance.
For governance and risk management professionals grappling with the changes, Governance Institute has released a new guide addressing key areas, including the significance for deeds, electronic storage, minutes of electronic meetings, and COVID-19 relief provided by the Treasurer’s Determinations.
The Statement on electronic storage and execution of documents and electronic meetings also includes a legal opinion from Douglas Gration, Of Counsel, on issues related to the electronic storage and execution of documents and electronic meetings under the Corporations Act (the Act), tackling many of the questions Governance Institute has received from members during the pandemic.
Key elements outlined in the guide include:
Electronic signing of minutes
- Documents required to be signed under the Act can be signed electronically if the signatory has authorised the affixing of their electronic signature.
- To demonstrate compliance with s 251A (2), which requires minutes of meetings to be signed, the company should retain proof of the authorisation of the individual who signs the minutes to the affixing of their signature.
- It may, as a matter of good governance, also be appropriate to ask the directors to pass a resolution noting and agreeing that the minutes will be (or have been) signed electronically.
Electronic meetings of directors and members
- Under s 248D a directors’ meeting may be held using any technology consented to by all the directors. The consent may be a standing one and a director may only withdraw their consent within a reasonable period before the meeting.
- Section 249S of the Act provides that a company may hold a meeting of its members at two or more venues using any technology that gives the members a reasonable opportunity to participate.
The location of a meeting held electronically
- A meeting may be held in two or more places or venues. The meeting will be held in each place in which an attendee is located.
- As a matter of good practice, the minutes of a meeting held in a small number of places would ordinarily record the places at which the meeting was held.
- In cases where it is important to know and record in the minutes the place or places where a meeting is held (for example for tax purposes), the minutes should record where the individual participants in a meeting held by telephone or videoconference are physically located.
The guide also outlines the effect of the temporary measures on the laws concerning the execution of deeds.
The statement will be a helpful guide to our members.
Treasury consultation on electronic execution and meetings
Governance Institute has consistently advocated for the Corporations Act to be brought into line with the modern business environment and to adopt a technology neutral approach. The COVID–19 response has exposed many of the shortcomings of the current legislative environment, particularly the outdated, paper-based tradition of the Corporations Act.
We have called for the temporary changes to the Corporations Act concerning virtual meetings and electronic execution of documents to be made permanent. Currently, these changes expire on 22 March 2021.
On 19 October 2020, Treasury released exposure draft legislation that would make permanent and expand upon the temporary relief which allows companies to hold meetings virtually, send meeting related materials electronically and validly execute documents electronically.
Companies have embraced the use of electronic means and alternative technologies to hold meetings and execute company documents. The use of these technologies has resulted in regulatory savings for industry and increased productivity. There is now an opportunity to permanently modernise the relevant provisions in the Corporations Act in a way that preserves members’ rights to participate.
Treasury has allowed a very short time for consultation on the exposure draft bill — interested parties have until 30 October to provide feedback on the draft provisions — in the hope that changes can be passed by Parliament before the expiration of the current temporary changes.
Governance Institute welcomes moves to bring the Corporations Act into the 21st century and will be reviewing the exposure draft bill carefully.
Key changes proposed to be introduced by the bill include:
- The laws relating to the execution of company documents will be made technology neutral and allow companies to execute company documents electronically. These changes apply to documents executed without a common seal, documents executed with a common seal and deeds.
- If a company executes a document by fixing a common seal, the persons witnessing the fixing of the seal may do so remotely.
- Meetings may be held using virtual meeting technology if all persons entitled to attend the meeting have a reasonable opportunity to participate.
- The new rules will apply to meetings of shareholders (including Annual General Meetings), directors, and members of registered schemes.
- the use of virtual meeting technology can be used to hold all meetings that are conducted in the context of external administration, including meetings of creditors and committees of inspection.
- The location of a virtual meeting will be taken to be the address of the registered office of the company or responsible entity of a registered scheme. The time for the meeting will be the time at the address of the registered office.
- When a meeting is to be held using technology, the notice of the meeting must include sufficient information to allow the persons entitled to attend the meeting to participate using the virtual meeting technology. This information could consist of dial in details or a link to the relevant website.
- The meeting notice for a meeting that is to be held using technology must also include sufficient information to allow members to provide proxy documents by electronic means.
- If a meeting is conducted virtually, all persons participating in the meeting (whether by being physically present or using electronic means) are taken to be ‘present’ and counted for the purposes of determining whether there is a quorum.
- At a virtual meeting of shareholders, votes must be taken on a poll rather than a show of hands.
- All participants who are entitled to vote must be given the opportunity to elect to either vote in real time or, if it is practicable for the company, in advance of the meeting.
- Circular resolutions may be provided and signed electronically.
- Minute books will be able to be signed electronically.
- Notices of meetings may be provided electronically. This covers notices of directors’ meetings, shareholders’ meetings and meetings of members of a registered scheme.
We will update members on the progress of this important and long-awaited reform.
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