The temporary COVID-19 relief measures introduced by the Federal Government, which amongst other things, allowed entities to hold meetings virtually, lapsed on 21 March 2021. These developments were discussed previously in our article published - Virtual meetings including AGMs (temporarily) permitted under new government determination.
It was anticipated that Parliament would extend those relief measures that modified the Corporations Act 2001 (Cth) (Corporations Act) by passing the Treasury Laws Amendment (2021 Measures No.1) Bill 2021 (the Bill). However, the Bill was not passed on the last sitting day before 21 March 2021.
Accordingly, the lapse of the temporary relief measures means that since 22 March 2021:
- while technology can be used to connect people at one or more other locations, completely virtual meetings are no longer permitted; and
- notices of meeting may only be sent electronically to shareholders who have opted to receive electronic communications in accordance with section 249J(3A) of the Corporations Act.
The implications of the lapsing of the relief measures on electronic execution and split execution under the Corporations Act are discussed separately.
On 25 March 2020 emergency legislation (in the form of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth)) came into effect which, amongst other things, empowered the Treasurer to make Determinations modifying the operation of the Corporations Act. However, any such Determination would automatically expire 6 months after they were made. The Treasurer's power to make these Determinations expired on 25 September 2020.
Pursuant to these powers, the Treasurer ushered in the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination No. 1) which modified any provision of the Corporations Act or the Corporations Regulations 2001 that requires or permits a meeting to be held, or deals with giving a notice of a meeting or the conduct of a meeting.
Determination No.1 was extended on 21 September 2020 by the Corporations (Coronavirus Economic Response) Determination (No.3) 2020 (Cth). Determination No 3 expired at midnight on 21 March 2021.
Outline of key changes to virtual meetings
As a result of the expiration of Determination No. 3, amendments made to the Corporations Act to facilitate the use of electronic means to hold meetings no longer apply. The position will revert to the law prior to the introduction of Determination No.3, as follows:
- Meetings must be held at a physical location. While technology can be used to connect people at one or more other locations, wholly virtual meetings are not permitted.
- Notices of meeting may only be sent electronically to shareholders who have opted to receive electronic communications in accordance with section 249J(3A) of the Corporations Act.
- Documents relating to a meeting must be posted unless the member has agreed to the document being sent via email or fax and the specific requirements in the Corporations Act are met. Some documents may only be provided via post.
Virtual meetings that were held before 21 March 2021 will not be affected by these changes.
ASIC adopts ‘no-action’ position and re-issues guidelines for virtual meetings
On 29 March 2021, ASIC adopted a temporary ‘no action’ position in relation to the convening and holding of virtual meetings. ASIC’s ‘no-action’ position will be reviewed in September 2021, or earlier if relevant measures are introduced by Parliament.
Commissioner Cathie Armour said, “It is important that business has certainty in the current environment. ASIC’s position is intended to facilitate businesses to hold their meetings effectively during the ongoing pandemic where there is still uncertainty around restrictions on gatherings and travel”. ASIC’s position is helpful, especially given that as we write this, Brisbane has re-entered lock down, demonstrating the unpredictability of operating in an environment while the vaccine roll out is ongoing.
In order to provide the market with a degree of certainty following the expiration of Determination No. 3, ASIC’s ‘no action’ position:
- supports the holding of meetings using appropriate technology;
- facilitates electronic dispatch of notices of meeting including supplementary notices; and
- allows public companies an additional two months to hold their AGMs
The position relating to the convening and holding of meetings using virtual technology (which is outlined in further detail below) applies to meetings held between 21 March 2021 and the earlier of:
- 31 October 2021; and
- the date that any measures are passed by the Parliament relating to the use of virtual technology in meetings of companies or managed investment schemes.
The position relating to the 2-month deferral of AGMs applies to entities with financial years ending up to 7 April 2021.
We note that ASIC’s no-action position does not preclude third parties from taking legal action in relation to the same conduct or conduct of that kind. Further it does not prevent a court from holding that particular conduct infringes the relevant legislation. ASIC has also noted that it will not undertake to intervene in an action brought by third parties in respect of such conduct.
Legal status of hybrid and virtual meetings
While ASIC considers that hybrid meetings are permitted under the Corporations Act, entities should check whether their constitution restricts hybrid meetings. In the absence of the amendments made by the Determinations, it is not clear whether the Corporations Act permits virtual AGMs. There is also uncertainty as to the validity of resolutions passed at a virtual AGM.
Entities should also consider seeking legal advice on section 1322 of the Corporations Act if they are concerned about the validity of virtual meetings. This provision notes that various irregularities associated with meetings held for the purposes of the Act are not invalidated unless the Court makes a contrary declaration.
ASIC’s ‘no-action’ position on virtual meetings held between 21 March 2021 and 31 October 2021
ASIC’s ‘no-action’ position on virtual meetings is conditional on:
- the technology or technologies used to hold the meeting providing members as a whole a reasonable opportunity to participate (sections 249S and 252Q of the Corporations Act). This includes ensuring that members who are participating remotely are able to ask questions and make comments at the meeting;
- voting at the meeting occurring by a poll rather than a show of hands
- each person entitled to vote being given the opportunity to participate in the vote in real time (where practicable voting should also be available in advance of the meeting); and
- the notice of meeting including information about how those entitled to attend can participate in the meeting (including how they can vote, ask questions, make comments or otherwise speak at the meeting to the extent they are entitled to do so)
In holding virtual meetings in reliance on this ‘no-action’ position, entities should consider ASIC’s guidelines on the appropriate approach to take when conducting investor meetings using virtual technology (see ASIC guidelines for investor meetings using virtual technology).
No action on convening meetings electronically
ASIC’s ‘no action’ position also covers any contravention of the Corporations Act if an entity sends notice of the meeting, or sends supplementary information in relation to the meeting, using one or more technologies to communicate to those entitled to receive notice of the meeting.
- Conditions attaching to this ‘no-action’ position are:
- notice of the meeting or supplementary information in relation to the meeting, whether given electronically or otherwise, must either include the contents of the notice or details of an online location where the contents of the notice can be viewed or from where they can be downloaded;
- where electronic addresses have not been nominated by those entitled to receive notice of the meeting, notice of how to access the contents of the notice must still be given personally or by post;
- supplementary instructions for on-line participation in the meeting must be given at least two business days before the meeting is held by:
- electronic message (if the member has provided the relevant details);
- a notice on the entity’s website; and
- a market announcement if the entity is listed on a market.
This no-action position covers any failure of the supplementary instructions to comply with sections 249J of the Corporations Act.
- No action for AGMs held within 2 months after due date
ASIC has also adopted ‘no-action’ position for public companies with a financial year end between 7 January 2021 and 7 April 2021 that do not hold their AGMs within five months after the end of the financial years, where these meetings are held up to seven months after year end.
This builds on the existing equivalent no-action position that applies to public companies with financial years that ended from 31 December 2019 to 7 January 2021 as previously discussed in our article - ASIC extends deadline for financial reporting obligations and amends ‘no action’ position for AGMs.
However, ASIC’s ‘no-action’ position does not operate to formally extend the time by which entities must hold their AGM.
Financial Reporting Obligations
ASIC had previously extended by one month the deadline for both listed and unlisted entities to lodge financial reports under Chapters 2M and 7 of the Corporations Act for entities with a financial year that ends between 21 February 2020 and 7 January 2021.
While ASIC has given a ‘no-action’ position for AGMs up to financial years ending 7 April 2021, ASIC is not currently intending to extend the class relief for financial reports to entities with financial years that end between 8 January 2021 and 7 April 2021.
However, entities may apply to ASIC for individual financial reporting relief should that be necessary in their circumstances. ASIC will have regard to the factors in s340 of the Corporations Act, as well as Regulatory Guide 43 Financial reports and audit relief and Regulatory Guide 51 Applications for relief, in deciding whether individual relief is appropriate.