ASIC releases guidance on upcoming AGMs and financial reporting requirements
Last Friday ASIC released “Guidelines for meeting upcoming AGM and financial reporting requirements” (Guidelines), having regard to the impact of COVID-19 on listed and unlisted public companies in satisfying these requirements under the Corporations Act 2001 (Cth) (Corporations Act).
The Guidelines acknowledge that companies with a 31 December 2019 balance date are required to conduct their Annual General Meeting (AGM) by 31 May 2020 and that such companies may require an extension of time to hold the AGM and greater flexibility in how the AGM is conducted.
At this stage the Guidelines do not apply to companies with 31 March or 30 June balance dates; however, ASIC has advised it is carefully monitoring the position and may update its guidance as needed. Further, the Guidelines apply only to AGMs and not to extraordinary general meetings (EGMs).
For listed and unlisted public companies with 31 December 2019 balance dates that are required to hold an AGM by 31 May 2020, ASIC has:
At present there is no change to financial reporting deadlines, however ASIC has noted it is monitoring developments that may affect financial reporting.
The Corporations Act:
These are not replaceable rules and are to be considered in conjunction with the company constitution.
The reference to “place” has traditionally been interpreted as referring to a physical location.
In recent years there has been increased interest in the holding of “hybrid” and “virtual” AGMs. Both may be viable options for companies conducting an AGM in the context of restrictions around large gatherings due to COVID-19 or in instances where shareholders are self-isolated or quarantined.
A “hybrid” AGM involves holding the AGM at a physical location, while also allowing shareholders to attend, vote or ask questions online. As the physical meeting is held at a “place”, this is generally considered to satisfy the requirements of the Corporations Act.
A “virtual” AGM is conducted entirely through an online platform. In the past it has been unclear whether this is permitted under the Corporations Act having regard to the requirement to hold the AGM at a “place”. While acknowledging this, ASIC has advised that it will take a “no action” position on non-compliance with provisions of the Corporations Act that may restrict the holding of a virtual AGM (such as s 249S).
ASIC’s no-action position on virtual AGMs is subject to members having a reasonable opportunity as a whole to participate in the AGM. In ASIC’s view, this would include:
Companies considering holding a hybrid or virtual AGM should first check their constitution to ensure it does not restrict meetings being held in this manner. In particular, for virtual meetings, consideration will need to be given as to whether the constitution permits shareholders attending online to be counted for the purposes of a quorum and whether shareholders are able to vote in some manner online.
Depending on the wording of the constitution, a company can then consider whether to proceed with a hybrid or virtual AGM incorporating appropriate technology. This could be in the form of a livestream or webinar by which shareholders can watch proceedings, submit questions online and participate in a poll. The technology should be on a secure platform with appropriate protocols around shareholder access and verification.
ASIC also encourages the use of proxy voting in conjunction with a hybrid or virtual AGM.
Modern constitutions may also permit direct voting, whereby shareholders can cast their vote through submitting an online or paper form before the meeting.
If the wording of the constitution is restrictive and precludes the holding of a hybrid or virtual AGM, a company can consider whether it can:
It is noted that the Guidelines will not prevent a member from seeking to challenge the validity of a meeting of members. Under section 1322 of the Corporations Act a meeting will not be invalidated for certain irregularities (such as an absence of a quorum), unless a Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by order of the Court. Where a company has concerns about the legality of its AGM being undertaken as a virtual or hybrid meeting, it should seek legal advice.
At present, the Guidelines do not extend to EGMs. If a company has convened an EGM or is proposing to convene an EGM, it should check its constitution to determine whether it is able to hold a hybrid EGM, determine what protocols and systems it can implement for a hybrid or virtual EGM and seek legal advice. Even though the Guidelines do not extend to EGMs it may still be possible to obtain a ‘no action’ letter from ASIC on a case by case basis in respect of a proposed hybrid or virtual EGM in the current circumstances. It may also be possible to postpone an EGM which has already been convened.
If you have any questions about your company’s AGM or EGM, please contact our Corporate Governance and Advisory team.