Governance Institute has been busy providing valuable feedback to regulators and Government on the impact of COVID-19 on companies’ ability to hold AGMs and generally. At the time of publication the Australian Government has announced a restriction on meetings of more than two people that essentially prohibits shareholder attendance at AGMs. Governance Institute will continue to update members on how changes will impact AGMs.
ASIC guidelines for meeting upcoming AGM and financial reporting requirements
Governance Institute welcomed ASIC’s guidelines for meeting upcoming AGM and financial reporting requirements issued on 20 March 2020. The guidelines, in response to the restrictions on large gatherings, travel restrictions and concerns from members about attending large-group meetings in the COVID-19 situation, was a result of close liaison with advisers and industry bodies, including Governance Institute.
ASIC has confirmed that, for companies with 31 December balance dates that are required to hold an AGM by 31 May 2020, it:
- will take no action if AGMs are postponed for two months (that is until the end of July) and
- supports the holding of AGMs using appropriate technology.
The ‘no-action’ position means that ASIC will not take action against any company with a financial year end of 31 December 2019 who fails to comply with s 250N (2) of the Corporations Act 2001 (Corporations Act) provided the company holds the AGM by 31 July 2020 or such later date as ASIC advises.
For companies wanting to proceed with holding AGMs by 31 May 2020 (or during the extension period) using technology to comply with COVID-19 restrictions, ASIC intends to take a ‘no-action’ position on virtual AGMs. This ‘no-action’ position is conditional on the technology providing members as a whole a reasonable opportunity to participate in accordance with s 249S. 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.
Companies are advised to make an assessment of their AGM facilitating technologies in advance of holding the meeting and consider whether it adequately addresses these conditions.
ASIC confirmed that it considers that hybrid AGMs are permitted under the Corporations Act but encouraged companies to check whether their constitution restricts meetings being held in this way.
The ‘no-action’ position on virtual AGMs is significant as ASIC considers that there is some doubt as to whether the Corporations Act permits virtual AGMs as well as doubt as to the validity of resolutions passed at a virtual AGMs.
Importantly, ASIC confirmed that it considers that hybrid AGMs are permitted under the Corporations Act but encouraged companies to check whether their constitution restricts meetings being held in this way. ASIC does not have the power to modify the Corporations Act to facilitate hybrid AGMs where they are not permitted under a company’s constitution.
ASIC also intends to take no action on any contravention of the Corporations Act if a company has dispatched a notice for a meeting to be held on or before 31 May 2020 and at least two business days before the meeting is held, the company sends members supplementary instructions for online participation by:
- electronic message (if the member has provided the relevant details)
- a notice on the company’s website
- a market announcement if the company is listed on a market.
The ‘no-action’ position covers any failure of the supplementary instructions to comply with s 249J of the Corporations Act.
ASIC warns that a ‘no-action’ letter does not necessarily prevent third parties from taking legal action in relation to the same conduct.
Governance Institute considers that the current situation exposes many of the shortcomings of the current legislative environment. We have consistently advocated for the need to bring the Corporations Act into the 21st century and to ensure that it is technology neutral.
An animation supporting our joint submission with the Australasian Investor Relations Association to the Government Deregulation Taskforce advocating amendments to facilitate electronic or digital disclosure of information to shareholders can be viewed here.
Guidance: COVID 19 and the impact on AGMs
Following hot on the heels of the ASIC guidelines, Governance Institute and the Australasian Investor Relations Association, with the assistance of the Business Law Council of the Law Council of Australia, issued guidance on COVID-19 and the impact on AGMs on 20 March 2020.
The comprehensive document is based on guidance issued by The Chartered Governance Institute and Slaughter and May on 16 March 2020 and explains the various options available to companies planning their AGMs in light of the spread of COVID-19 and the ASIC ‘no-action’ letter.
The guidance is aimed at listed companies but is applicable to unlisted public companies as well.
The options available to companies are:
- adapt the basis on which you hold your AGM
- delay convening your AGM, if notice has not yet been issued
- postpone your AGM, if permitted by your constitution
- adjourn your AGM
- apply to ASIC for an extension of time to hold your AGM
- conduct a hybrid AGM, if permitted under your constitution
- rely on the ASIC ‘no-action’ position to conduct an online AGM or to hold your AGM up to two months past the prescribed deadline.
Given that the situation continues to evolve, companies may ultimately have to use more than one of these options. If the company has not already issued its meeting notice, the guidance recommends companies consider including a special resolution in the notice of meeting, to update the constitution to permit hybrid and online meetings and direct voting and other provisions to provide flexibility for holding meetings.
Companies with a deadline of 31 May have very little leeway and will have to act quickly to determine how they will proceed. With the situation changing daily, companies will also need to update their shareholders with details of any changes to the meeting arrangements.
Some of the measures companies should consider if proceeding with their AGM include:
- Confirm the position with the venue provider. Ensure that the venue is still prepared to host the AGM given constraints on the size of indoor gatherings and appropriate sanitisation arrangements and consider booking a fall-back venue. If moving to another venue or if the situation otherwise changes, it may become necessary to postpone or adjourn the meeting.
- Include an insert in the AGM materials package encouraging direct or proxy voting and advising how to send questions in advance and the methods of updating shareholders as the situation evolves.
- Contact your registry and technology provider to discuss arrangements and contingency plans including the possibility of a hybrid meeting or online meeting.
- Establish a dedicated AGM area on the company website. This area would include the details of arrangements for the meeting, links for web-streaming and can be updated to reflect changes to the situation, including about attending the AGM. Where appropriate, updates can also be given by announcement.
- Consider announcing a shareholder event to be held later in the year. Although this will not be the AGM, companies may wish to offer shareholders, particularly retail investors, the opportunity to engage with directors later in the year.
- Introduce appropriate safety measures. The constitution may contain provisions permitting directors to introduce arrangements before and during an AGM to ensure the safety of attendees. Companies could rely on these provisions to take appropriate safety measures, including restricting the number of attendees and requiring temperature checks and self-certifications.
- Dispense with the provision of refreshments and any other complimentary offerings before and after the meeting. Announcing this in advance is likely to reduce the number of attendees.
- While, it is good practice for as many of the directors as possible to attend the AGM, this is not a legal requirement (other than the chair) and it therefore does not invalidate the meeting if some (or most) are unable to do so. If directors do not attend in person, they could be available for questioning via video link.
- Minutes of the AGM must be produced one month after the AGM. It is common practice for the company secretary to prepare the minutes of the AGM and there should be appropriate arrangements for the company secretary to be able to take the minutes.
A link to the guidance is here.