Bill introduced to repeal the 100-member rule to call a general meeting
The government has introduced the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 to repeal the ‘100-member rule’ to call a general meeting. An exposure draft was released earlier this year for public consultation.
However, the bill does not include the expected changes to the dividend provisions of the Corporations Act 2001. The exposure draft contained reforms to address the difficulties associated with s 254T and the current dividend test, but they have not made it into the final bill.
Governance Institute has, for over a decade, led a campaign against the ‘100-member rule’, which is open to abuse by special interest groups who threaten to call an extraordinary general meeting (EGM) between AGMs unless the company negotiates on marginal issues that do not have majority shareholder support.
This is a vexatious practice, as it can cost a large listed company such as Telstra many millions of dollars to hold an EGM — a cost to shareholders who do not support the issue of the special interest group.
Shareholder rights are not curtailed by removing the 100-member rule to call a general meeting. Shareholders are not disempowered because the bill still allows for groups with five per cent of the votes that can be cast to requisition an EGM — ensuring that there is a level of shareholder support before other shareholders are put to the cost of an EGM. Importantly, it also preserves the right of 100 members to put issues on the agenda of the annual general meeting (AGM) which is a central plank in a corporate governance framework.
In 2005 Governance Institute (then known as Chartered Secretaries Australia) led a coalition of professional associations to convince government decision-makers to repeal the rule. This coalition included the Australian Institute of Company Directors, Business Council of Australia, Australian Shareholders’ Association, Investments and Financial Services Association (now Financial Services Council), FINSIA, Australasian Investor Relations Association and Australian Employee Ownership Association.
In 2005, the Corporations Amendment Bill (No.2) recommended the repeal of the rule. The Parliamentary Joint Committee which reviewed the bill also supported its repeal. Despite bipartisan support momentum stalled and this step was never taken, so it is good to see this reform finally being progressed.