Since the onset of the COVID-19 pandemic last year, many companies have embraced temporary e-signing and virtual meeting measures which facilitated the conduct of business in a physically distanced world. Those temporary measures expired yesterday and legislation which further extends them has stalled in the Senate. We summarise where things stand below.
Background
In May 2020, the Federal Government introduced temporary relief measures to allow:
- companies to provide notices of meeting for general meetings prescribed under the Corporations Act 2001 (Cth) (Corporations Act) via email;
- the holding of shareholder meetings virtually; and
- companies to execute documents electronically (e.g. via Docusign) with split execution allowed (previously, there were differing opinions as to whether electronic execution or split execution was permitted or whether officers were required to execute a single physical document to comply with s 127 of the Corporations Act).
The measures were intended to make it easier for companies to manage their obligations amidst COVID-19 restrictions. They were given effect by the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 and subsequently extended under the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determinations). Each Determination modified the Corporations Act to apply the changes for a six-month period.
The current status
Determination No. 3 expired yesterday, 22 March 2021.
The Treasurer was granted the power to make the Determinations under separate COVID-19 relief legislation. That power expired on 24 September 2020.
The Government recently introduced the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill) to Parliament which included an extension to the temporary relief measures for a further six months to 15 September 2021.
The Bill passed the House of Representatives last week, but failed to pass the Senate and has been referred back to the Senate Economics References Committee for further reporting by 30 June 2021. The Senate’s consideration of the Bill has been deferred until the first sitting week in August.
While the extension to the e-signing and virtual meeting arrangements were not opposed, the Bill also proposes permanent changes to the continuous disclosure regime under the Corporations Act (see our previous alert) which are the subject of debate.
ASIC to adopt “no-action” position on virtual meetings
Today ASIC has announced that it will shortly adopt a temporary “no-action” position in relation to the convening and holding of virtual meetings with a view to providing certainty for businesses in the current environment.
ASIC states that its no-action position will:
- support the holding of meetings using appropriate technology;
- facilitate electronic dispatch of notices of meeting including supplementary notices; and
- allow public companies an additional two months to hold their AGMs.
Further details will be made available by ASIC over the coming days.
ASIC states that it will not be providing a no-action position in relation to electronic signatures.
Where do things stand now?
In summary, the position is as follows:
- Companies will be able to rely on ASIC’s no-action position to hold virtual meetings and distribute meeting materials electronically, subject to further details being released. Companies should still review their constitution to check for any specific requirements relating to the holding of general meetings.
- With the expiry of the Determination, it is no longer clear if companies can execute documents electronically or by split execution in accordance with s 127 of the Corporations Act. It is important to note that s 127 of the Corporations Act does not limit the ways in which a company may execute a document but rather compliance with s 127 entitles third parties to rely on certain assumptions, e.g., that the document has been duly executed, the officers who executed the document were duly appointed and the company’s constitution complied with. Accordingly, non-compliance with s 127 does not necessarily mean the execution is invalid. However, in a contractual setting parties will usually execute in accordance with s 127 to have the benefit of the assumptions in s 129. This is likely to lead to a return to the general practice of executing in wet ink signature only.
In light of the expiry of Determination No. 3 yesterday, companies should review the arrangements they may have had in place for the execution of documents to ensure compliance and continue to “watch this space” as the Bill comes before the Senate again in August.
In relation to general meetings, ASIC’s “no-action” position will provide much-needed certainty to companies that they can continue to hold virtual meetings while restrictions around physical gatherings and travel remains.
If you have any queries, please contact our Corporate Advisory and Governance team.