11/05/2020

This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less. 

In this Edition, we consider Corporations Act changes to permit virtual meetings and notices of meeting, FIRB guidance on increased foreign investment screening and WA’s roadmap to easing COVID-19 restrictions.

YOUR KEY BOARDROOM BRIEF

Virtual meetings and electronic quorum, votes, notices of meeting and questions.  On 5 May 2020, the Treasurer registered modifications to the Corporations Act to address logistical challenges posed by social distancing requirements during the COVID-19 pandemic which temporarily: (i) permit entirely virtual meetings and electronic notices of meeting; and (ii) expressly allow company officers to validly sign counterparts of documents without both officers needing to sign the same physical instrument, and to do so by electronic means provided certain conditions are met.  The determination helpfully removes obstacles for companies whose constitutions contain meeting provisions that do not allow them to hold virtual meetings notwithstanding ASIC’s no-action position of 20 March 2020 and addresses previous doubt over whether the Corporations Act permits AGMs to be held virtually.  Our G+T article “Virtual meetings including AGMs (temporarily) permitted under new government determination” provides an overview of the changes and interaction with ASIC’s no-action position on AGMs.  The changes will expire (unless withdrawn or reissued) on 5 November 2020. However, with the COVID-19 pandemic having the potential to disrupt large gatherings for quite some time, we expect to see the use of technology for Corporations Act meetings to eventually become a permanent feature of the landscape.  Directors should begin to consider what this means in terms of engagement with major shareholders, proxy advisers and other representative groups for the forthcoming AGM season.  See the Treasurer’s media release and the determination here.

More on virtual meetings.  In the insolvency context, moves are also afoot to permit virtual meetings.  In Application in the matter of Virgin Australia Holdings Ltd (Administrators Appointed) [2020] FCA 571, the Federal Court permitted a creditors’ meeting to be conducted exclusively by electronic means.  Similarly, in Re Avita Medical Ltd [2020] FCA 592, the Federal Court made orders permitting Avita to hold a virtual meeting for its shareholders to consider and vote on a proposed scheme of arrangement.

Guidance on FIRB’s increased foreign investment screening.  On 24 April 2020, the Foreign Investment Review Board (FIRB) released Guidance Note 53 to address the effect of changes announced on 29 March 2020 to the foreign investment regime, which included as a “temporary measure” a zero threshold for assessment of all foreign investments and an extended review timeframe of six months.  The Guidance Note supplements the Q&A and sets out examples of how the temporary changes could apply for different acquisitions. The Guidance Note is not exhaustive and does not cover all types of actions that may be subject to foreign investment screening.  It advises, among other things: (i) urgent applications may be given priority and information supporting urgency should be provided; (ii) fees are payable for all review applications during the 6-month statutory review period; (iii) increased application volumes may result in delays; (iv) conditions will be applied proportionately to address identified risks on a non-discriminatory case-by-case basis; (v) pre-existing agreements completed before 10.30pm (AEDT) on 29 March 2020 and options acquired before then, even if exercised after the announcement, are not subject to the temporary measures; and (vi) a foreign person merely establishing an Australian entity in anticipation, or for the purposes, of executing future transactions will generally not be a notifiable action.  The measures are intended to prevent Australian companies falling to opportunistic acquirers.  However, FIRB's tough line on COVID-19 era foreign acquisition has attracted criticism from the Australian mining sector, which has historically been heavily reliant on foreign capital for development.  See G+T article “New rules on foreign investment announced under FATA” for an overview of Australia’s foreign investment rules, the changes and key implications.

THE WEEK AHEAD

Australia has flattened the curve – now to flattening the curve of unemployment.  Last Friday, the national cabinet released a national framework for guiding Australia into economic recovery.  An article in the Australian Financial Review this morning reported Deloitte’s prediction that the federal deficit could blow out to a record $143 billion this financial year due to the massive government spending required to support the economy through the COVID19 pandemic and resulting sharp economic downturn.  States will ease restrictions at their own pace; with WA’s Premier Mark McGowan confirming yesterday WA’s social, dining and regional travel restrictions will be loosened from 18 May as part of a four-phase plan.  Phase 2 would allow tourism and hospitality to resume to some degree and the details of Phase 3 (likely to big in mid-June) and Phase 4 (date yet unknown) are to be finalised in the coming weeks.  WA’s hard state border would likely be the last restriction lifted.  For the WA’s Government’s roadmap and FAQs, click here.

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Our COVID-19 hub collates important articles and legal advice on various aspects of COVID-19 on how it may impact your business.