In response to the adverse impact that the COVID-19 pandemic will have on Australian companies’ ability to hold annual general meetings (AGMs), ASIC issued a guidance note – 20-068MR on 20 March 2020 (Guidance):
- confirming its support for the holding of AGMs using technology; and
- extending the time frame for public companies with 31 December balance sheet dates to hold their AGMs.
We discuss some of the key takeaways for Australian companies below.
Support for holding AGMs using technology
Pursuant to the Corporations Act, a public company must hold an AGM within five months after the end of its financial year.
There is no such requirement for private companies, however the constitution of a private company may impose a requirement on it to hold an AGM.
In its Guidance, ASIC has confirmed support for holding AGMs using technology provided that certain conditions are met.
This is welcome news for all Australian companies planning to hold an AGM during this crisis.
It is easy to see how hybrid AGMs (where there is a physical location and online facilities) and virtual AGMs (conducted solely online) would be useful during this time since it allows any shareholders to attend regardless of where they are in the world.
Specifically, ASIC has said in its Guidance that it considers hybrid AGMs permissible under the Corporations Act and noted that whilst it is unclear whether virtual AGMs are permitted (and whether resolutions passed at virtual AGMs are valid) under the Corporations Act, it will take no action against a company if it holds a hybrid or virtual AGM provided that:
- the technology provides members as a whole a reasonable opportunity to participate. According to ASIC’s Guidance, this means for either hybrid AGMs or virtual AGMs, ensuring that the technology that is being used allows:
- embers being able to ask questions of the auditor and about management; and
- voting is able to occur by a poll rather than a show of hands; and
- at least two business days before the meeting is held, the company sends members supplementary instructions for on-line participation by:
- electronic message (if the member has provided the relevant details);
- a notice on the company’s website; and
- a market announcement if the company is listed on a market.
Given the uncertainty as to whether resolutions passed at virtual AGMs are valid, we think that despite ASIC’s Guidance, a virtual AGM is the least viable option at this time.
In any case, companies seeking to take advantage of this flexibility are strongly encouraged to check whether their constitutions allow on-line participation in an AGM and also read and consider the detailed recommendations set out in the article prepared by the Governance Institute of Australia and the Australasian Investor Relations Association on COVID-19 and the impacts on AGMs.
If the entity is a public company and is unable to hold the AGM using technology – either because the constitution does not allow for online participation or it is determined that it cannot otherwise provide effective on-line participation for logistical or technical reasons – it can instead delay the convening of the physical AGM and hold it later in reliance of ASIC’s no-action position on deferred AGMs.
ASIC has confirmed in its Guidance that, for public companies with 31 December balance sheet dates, it will take no action against any upcoming AGMs that need to be deferred until 31 July 2020 (or such later date as ASIC advises).
Public companies with a different balance sheet date may need to approach ASIC for specific relief (as long as application is submitted before the deadline for holding the meeting).
If a public company has already issued an AGM notice, it can postpone (or commence and adjourn) its AGM if its constitution permits it to do so.
If you require any assistance or advice in planning for your AGM during this time, please feel free to contact us.
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