Modernising Business Communications goes live: What does this mean for you?
On 14 September 2023 the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2023 (Cth) (Act) received Royal Assent, meaning that most of the provisions have now commenced. The Act, amongst other things, aims to modernise communication methods available to entities under the Corporations Act 2001 (Cth), and build on existing technology neutrality changes borne as a result of the COVID-19 pandemic.
The Act introduces changes providing for:
Any document required or permitted to be signed by a person under the Corporations Act can now be signed electronically. Previously, whilst electronic execution was permitted in certain circumstances, some documents still required wet ink signatures.
The Act significantly expands the scope of documents under the Corporations Act which can be circulated electronically. Of particular note is the extension of electronic dispatch to documents issued under the Chapter 6 provisions concerning takeovers.
Any document that is required or permitted to be sent under Chapters 2A to 2M, 5 to 5D, 6 to 6C, 8A, 9 and Schedule 2 of the Corporations Act, other than those lodged with ASIC, the Registrar or the Takeovers Panel, can be sent in any of the following ways:
Where the Corporations Act requires a document to be sent to ASIC, the Registrar or the Takeovers Panel, the requirement to provide the document in hard copy will remain.
Some of the documents which can now be dispatched electronically to members include:
However, entities dispatching documents, either in hard copy or electronically, will need to be mindful of the requirement to adhere to member’s elections concerning delivery of documents. Whilst not entirely new, the penalties for non-compliance with elections can be significant. This is discussed in further detail below.
Previously, shareholders could elect to receive certain documents either in hard copy, electronically or, in some cases, not receive the documents at all by giving notice to the company. The Act has introduced changes to extend the right to make such election to holders of securities in a target company for a takeover bid, as it concerns documents issued by the bidder.
A member can elect to receive all documents, a specific document, or a class or type of document in hard copy or electronically. Where a member of a company elects to receive all documents in a particular form, then that election will also apply to any takeover related documents sent to the member by a bidder.
Under the previous laws, a company which is the target of a takeover bid under Chapter 6 must provide the bidder with the names and addresses of any person with a security interest in the bid class. The Act expands this provision to require the target company to provide the electronic addresses of security holders known to the target company, and details of any elections made by security holders which are still in force.
To prevent against potential misuse of this information by the bidder, significant penalty provisions have been introduced, whereby if a bidder uses the information for a purpose other than that which relates to the bid (or compulsory acquisition as the case may be) a civil penalty of 10,000 penalty units applies ($3,130,000.00).
A public company must notify members of their right to make an election each year, with a failure to do so amounting to a strict liability offence attracting 30 penalty units.
Under the existing laws, a company will have committed an offence of strict liability by failing to comply with a member’s election, however the failure to comply with a member’s election will not effect the validity of the document issued. This is not changed by the Act, but is important to consider in the context of the expanded electronic dispatch provisions.
The Act introduces certain relief for entities from the requirement to continue to send notifications and documents under the Corporations Act where they know the contact details they hold for a member are no longer current. To qualify for this relief, the following conditions must be satisfied:
In demonstrating reasonable efforts, the sender must attempt to contact the recipient using all known contact details provided to the company by the recipient in their capacity as a member. Generally, the sender should not use contact details from other relationships, such as those provided by a member in their capacity as a customer.
The sender must make contact attempts during the 6 to 18 month period after meeting the relief conditions, otherwise, the relief becomes ineffective. During this period, the sender should attempt to inform the recipient that document sending has been suspended but will resume if the recipient provides a current address. It will therefore be important for companies to remember this is not a “set and forget” system and will constantly need to be monitored.
To help ascertain the member's current address, the sender is exempted from adhering to the member's election if they reasonably believe the nominated address is not current. However, the sender bears the burden of proof for showing that they reasonably believed the address was not current.
The Act has introduced amendments to the Corporations Act as it concerns the publication of notices in newspapers. Generally speaking, where the Corporations Act previously required notices be published in a newspaper, these provisions have been amended to allow notices to be published in a manner which is publicly available and reasonably prominent, be it in a newspaper or otherwise.
As at the date of this alert, the changes relating to the requirements to publish in newspapers are not yet in force, with the effective date concerning these changes to be fixed by proclamation (the Treasurer will decide a date and publish a notice in the Gazette to announce the commencement), or 6 months from the date of royal assent, whichever occurs first.
In the explanatory memorandum for the Act, an example where a company had published a notice on its company website was considered to be accessible to the public and reasonably prominent, however a notice published to the ASX was not.
However, notwithstanding these changes, publication of notices in a newspaper will continue to satisfy notice requirements, and companies may elect to continue publishing notices in this manner.
HopgoodGanim can support companies navigating the new communications regime. For more information, please contact HopgoodGanim Lawyers’ Corporate and M&A team.