Acting for You, June 2020

Governance Institute continues to engage with government, regulators and other stakeholders on issues arising from the COVID-19 pandemic affecting our members.

Executing documents during lock down and the impact of public meeting restrictions on holding AGMs are just some of the issues our members tell us are top of mind.

Governance Institute therefore welcomed the release of the Treasurer’s Corporations (Coronavirus Economic Response) Determination (No 1) 2020 on 6 May 2020 allowing companies to hold virtual meetings (a meeting where all shareholders participate online) while public health restrictions are in place and enabling electronic execution of documents.

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. It overcomes the issue of companies not being able to hold legally valid virtual meetings due to the provisions of their constitutions as well as the doubt surrounding their legality under the Corporations Act. It also provides for a way that companies can more easily communicate with their shareholders.

Key features of the Determination 

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. 
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ASIC Guidelines for investor meetings using virtual technology

ASIC has also issued Guidelines for investor meetings using virtual technology to ensure that meetings using technology are conducted in a meaningful and effective way that provides a reasonable opportunity for members to participate.

ASIC’s guidelines are based on the Determination.

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

  • virtual meetings where circumstances permit
  • ‘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.

Some listed companies holding their AGMs in late May have relied on the Determination to hold online AGMs with all shareholders participating online. The feedback we have received from members who have conducted their AGMs online has been largely positive.

Interestingly, ASIC has commenced a program of observing hybrid and virtual meetings held during the COVID-19 restrictions. The program is ongoing and ASIC has indicated it may provide further guidance if warranted based on its continuing observations. 

Where companies usually hold their AGMs after 5 November, it currently appears they may not be able to rely on the Determination as it will have expired. Governance Institute has called on Government and regulators to provide certainty for companies holding their AGM after 5 November 2020 so that they can rely on the Determination to hold their meeting online.

We will continue to provide members with updates on this issue.

Execution of documents

Executing documents when staff are working remotely has proven to be a challenge for many of our members.

The Determination alters the operation of s 127 of the Corporations Act 2001 (Corporations Act) to give certainty that when company officers sign a document electronically (including an electronic document), the document has been validly executed.

A company may now execute a document without a common seal if each person required to sign the document on behalf of the company either:

  • signs a copy or counterpart of the document in physical form; or
  • uses electronic communication which reliably identifies the person and indicates the person’s intention about the contents of the document. 

There are a wide variety of means by which officers of a company might sign a document electronically. These include: 

  • pasting a copy of a signature into a document 
  • signing a PDF on a tablet, smartphone or laptop using a stylus or finger 
  • cloud-based signature platforms like DocuSign.

Signatories do not need to sign the same physical document. Instead, a document could be signed and scanned by the first signatory and then printed and signed by the second signatory, or separate electronic signatures could be applied to fully electronic versions of the document. 

If these elements are satisfied, then an electronic signature applied under s 127 will be effective to execute a document. 

While the Determination is in effect, there is no need for a single static document in order to satisfy s 127 of the Act. The entire process of executing a document can be carried out using electronic communications, so long as a method as reliable as appropriate to the circumstances is used to identify each person and his or her intention to execute the document on behalf of the company.

Post-recovery

COVID – 19 has exposed many of the shortcomings of the current legislative environment. We have consistently advocated about the need to bring the Corporations Act into the 21st century and to ensure it is technology neutral.

The Treasurer’s Determination assists companies in addressing the challenges created by COVID-19 — the fact this was required illustrates the out-dated paper-based state of the Corporations Act. These changes represent important and sensible reforms in response to the challenges facing companies meeting their regulatory requirements and should form the basis for more permanent reforms that apply after the pandemic restrictions are lifted. Australia’s corporate regulatory infrastructure should be certain, coherent and fit-for-purpose in the contemporary environment.

Governance Institute is considering what regulatory changes resulting from the pandemic should remain in force, or be adapted post-recovery. The pandemic has acted as a ‘step change’ and we consider Government should make the most of this valuable reform opportunity. We are interested in members’ views. If you have ideas you would like to share please email me at policy@governanceinstitute.com.au.

Media releases

Shifting boardrooms: New report puts board diversity in all its forms under the spotlight 19/05/2020

Lack of crisis planning exposed: Survey of 393 executives identifies top risk pressure points 12/05/2020

Expert line-up for Virtual Governance and Risk Management Forum announced 01/05/2020