Public entities (both listed and unlisted) are generally required by the Corporations Act to hold an annual general meeting (AGM) within 5 months of the end of their financial year. For many entities, this deadline is rapidly approaching.
In light of the ‘social distancing’ measures recommended by the Government, travel restrictions and bans on large gatherings as a result of COVID-19, public entities are appropriately considering alternatives to holding physical AGMs with large numbers of shareholders and other attendees. Indeed, entities that proceed with holding a physical AGM risk non-compliance with the related obligation to afford members a reasonable opportunity to participate in the meeting.
To facilitate the public health measures, ASIC initially issued guidance on 20 March 2020 and further guidance on 13 May 2020 under which it will take ‘no action’ if entities with financial years ending between 31 December and 7 July postpone their AGMs by up to seven months, and supporting the holding of AGMs using appropriate technology, as follows:
- Two-month extension for AGMs: ASIC has confirmed that it will take ‘no action’ against an entity with a financial year end between 31 December 2019 and 7 July 2020 which does not hold its AGM within 5 months of the end of its financial year, provided that the entity must do so within seven months of the end of its financial year.
- Hybrid and virtual AGMs: For entities with a financial year end between 31 December 2019 to 7 July 2020 who hold an AGM during the period referred to above, ASIC will support the holding of AGMs using technology, including virtual and hybrid AGMs (in person and via technology), by confirming that it will take ‘no action’ for associated contraventions of the Corporations Act provided that it is satisfied that the technology used provides members as a whole a reasonable opportunity to participate in the AGM, including that all voting should be by poll rather than by a show of hands.
- Electronic supplementary notices: ASIC has also confirmed that they will take ‘no action’ where an entity sends to members, at least two business days before the AGM, supplementary instructions for online participation in the AGM via electronic message, notice on the entity’s website and a market announcement (if the company is listed). The notice of meeting must clearly explain how to use the technology for the AGM and how a reasonable opportunity to vote, comment and ask questions will be afforded to participants, and should specify an email address (or other online submission facility) for the service of proxy appointments and proxy appointment authorities.
While a ‘no action’ by ASIC does not mean that a breach does not occur, it is an indication that ASIC does not intend to take any enforcement action in respect of such breach. However, it does not preclude third parties from taking legal action.
Public entities with a 31 December to 7 July financial year end should consider the following practical steps:
- Virtual or hybrid AGMs: Companies should confirm that their constitutions permit the use of technology in meetings of members and liaise with their technology providers and share registries to ensure that the technology used to hold the virtual or hybrid AGM will give members a reasonable opportunity to participate in the meeting. This may include
- livestreaming the AGM;
- establishing an online shareholder Q&A forum;
- using electronic polls to ensure that the votes of shareholders who are not physically present will be counted.
As the entity’s auditors are required to attend the AGM, arrangements should also be made with the auditor in advance.
- Clear communication with shareholders: Companies should encourage their shareholders to check the company website and announcements for AGM updates. Any changes to the AGM process should be announced as soon as possible to the market (if listed) and by electronic message and notice on the entity’s website.
- Continue to monitor the situation: Companies should stay informed on the COVID-19 situation, including advice from public health bodies, the government and relevant regulator updates, and be prepared to revise their AGM plans accordingly.
The Law Council of Australia, in in partnership with the Governance Institute of Australia and the Australasian Investor Relations Association, has also published a detailed guidance note setting out further practical suggestions on how to ensure compliance with the modified AGM requirements.
Finally, all public entities should also continue to monitor the COVID-19 situation and whether it will impact the holding of their AGM within 5 months of the end of their financial year. ASIC has said that it will carefully monitor the COVID-19 situation and market conditions, and may further update their guidance if needed.