Acting for You, September 2020

On 31 July 2020, the Commonwealth Government announced that it would extend its temporary relief in respect of online meetings and electronic document execution for a further six months to 21 March 2021. 

Governance Institute welcomed the decision from the Treasurer which means companies can continue to hold lawful — virtual — meetings while still adhering to distancing requirements in place due to the pandemic. The changes also give business certainty that when company officers sign a document electronically, the document has been validly executed.

Until the announcement, companies intending to hold their AGMs after 5 November 2020 were unable to rely on the determination to hold their meetings online. In its announcement, the government cited feedback from industry that the temporary changes had provided certainty to business and helped them to continue to operate through the coronavirus crisis. 

Under the extension of the temporary relief measures companies will continue to:

  • provide notice of annual general meetings to shareholders using email
  • achieve a quorum with shareholders attending online; and
  • hold annual general meetings online.

To execute documents, company officers will continue to be able to sign documents electronically, so for the duration of the extended relief, signatories will not be required to sign the same physical document.

We have argued that these changes should form the basis for more permanent reforms that apply after the pandemic restrictions are lifted as they address longstanding issues that impact the ability of companies to operate effectively and efficiently having regard to the wide use of technology across the business and private sectors.

We continue to bring issues of concern arising from the impact of COVID-19 to the attention of the government and regulators.

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Senate select committee on financial technology and regulatory technology — answers to questions on notice 

As discussed in the August edition of Acting for You, Governance Institute appeared before the Senate select committee on financial technology and regulatory technology on 30 June 2020 and gave evidence on changes that should be made to the Corporations Act to bring it into the 21st century.

Governance Institute has subsequently provided information to the Senate committee about the specific sections of the Corporations Act 2001 (Corporations Act) that need to be changed to provide for technology-neutral distribution of meeting materials and how those changes could be made. 

We have referred the Senate select committee to the legislative solution we originally proposed in 2016 to the challenges faced by companies communicating with their shareholders. We continue to recommend that ss 249J (3) and (3A) of the Corporations Act be amended to provide that a company is to distribute meeting notices and materials to its members:

  • using a universal or near-universal channel of communication, and
  • a shareholder could opt in to receive them in hard copy. 

If a shareholder does not provide a preferred communication method (for example, an email address) nor opts to receive hard copy meeting materials, we consider that they should be deemed to have received the materials, subject to the company making the meeting materials:

  • available in the public domain
  • accessible utilising a universal or near-universal channel of communication and
  • issuing an ASX announcement (if listed).

Our recommendation is predicated on the government recognising in the explanatory memorandum that email and website communication currently meet the definition of near-universal channels of communication, even though this may change over time. 

As technologies evolve, how companies disclose meeting notices and materials in the public domain and accessibly may change from website disclosure. The technology-neutral provision will allow for this. 

The COVID-19 pandemic has highlighted the need for a change to the way companies communicate with their shareholders and we have urged the government to reform the Corporations Act to bring it into the 21st century.

CHESS Replacement Project

Governance Institute has provided feedback to the ASX on issuers’ key concerns in relation to the CHESS Replacement Project. We stated that while our members understand the need for, and support CHESS Replacement, it must take place according to a plan which clearly sets out the cost benefits, creates operational efficiency and provides certainty of data ownership for issuers and for those businesses providing services to them. 

Our key concerns include:

  • the need for ASX to consider a new governance model for the project and for clearing and cash equity clearing and settlement services more generally that better enableissues to be discussed and aired in a purpose-designed forum
  • whether the project timeline is achievable given the COVID-19 pandemic
  • the case for structural change and functional enhancements has still not been shared in detail. The base case is to replace ageing technology, but the information released, and the processes undertaken to date, to roll out the CHESS Replacement Project indicate that ASX may be extending the scope of its operating platform
  • ASX’s ‘Big Bang’ implementation of a single cutover date
  • the uncertainty relating to the costs to use new mandatory services and the potential impacts apparent in the second tranche of draft Settlement Operating Rules relating to certain corporate action events
  • the future data governance protocols that will be in place in the new system as there is potential for new third parties to access data. Who will determine what information can be accessed and how will that be managed? Who is responsible for the new third parties once they are authorised to access data? What is ASX’s role in providing any new services over an issuer’s data and how will that impact their shareholders?
  • the future of CHESS Holding Statements, including how ASX will provide the new digital service to investors, the provision of shareholder’s e-mail addresses held by brokers to issuers and how issuers will integrate their communications with their investors.

We will continue to update our members on the progress of this important project.

Donated member documents

During the pandemic our members have been busy sending in documents to be included in our donated member document service. Donated member documents are sample documents sent in by members and approved for inclusion in the service by our Corporate Legal Issues Committee. They are freely available to members as a member service. 

Examples of some of the documents recently donated by governance practitioners that may be of use to members in their day to day work are:

The terms of use of the documents are contained in the document footer. Members who may wish to donate documents to the service can send them to me at policy@governanceinstitute.com.au.

Recent advocacy activity [Set recent advocacy/submissions/ media releases as table]

Submissions

Issues arising from COVID-19 — 21 August 2020

ACNC’s best practice guide for financial report disclosures — 21 August 2020

United Nations sustainable development goals 10 August 2020 

CHESS replacement: revised implementation timetable 6 August 2020

Internal audit better practice guide for financial services principles and recommendations — 6 August

2020 

Senate select committee on financial technology and regulatory technology — answers to questions on notice 14 July 2020

Media releases 

Corporates call on Federal Government to adopt policies for sustainable recovery from COVID-19 — 10 August 2020

Weakest link: report highlights top data governance risks for corporate Australia — 5 August 2020

Extension of COVID-19 changes to Corporations Act welcomed by Governance Institute — 31 July 2020 

Paid pandemic leave cost burden should be absorbed by government — not business — 28 July 2020

 

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