In this edition of Gilbert + Tobin's Corporate Advisory Update, we focus on key legal developments over the last month which are particularly relevant to in-house counsel.
Temporary COVID-19 Corporations Act relief to allow virtual company meetings and electronic and split execution extended to 22 March 2021
The temporary relief granted under the now repealed Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 has now been extended until 22 March 2020 by means of the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020.
The extended relief continues to modify the Corporations Act to allow companies to:
- hold meetings (including AGMs) remotely via virtual meetings (and allow for a quorum, votes, notices of meeting and the asking of questions electronically) (see our previous Insight 'Virtual meetings including AGMs (temporarily) permitted under new government determination' on the original relief); and
- execute documents under section 127 electronically and where more than one signatory is required, permit the use of ‘split executions’ (where the two officers of a company execute separate counterparts of a document, whether in electronic or physical form) (see our further Insight 'Electronic & split executions to continue under s 127 Corporations Act' on the extended relief for more details).
Temporary COVID-19 relief for ‘low doc’ capital raisings extended to 1 January 2021
ASIC has extended the temporary relief originally provided on 31 March 2020 to assist listed entities affected by the pandemic to raise capital in a quicker and less costly way without undermining investor protection to 1 January 2021. The relief allows enables certain ‘low doc’ offers (including rights offers, placements and share purchase plans) to be made to investors without a prospectus, even if they do not meet all the normal suspension requirements.
ASIC has also extended the financial advice relief related to the COVID-19 early release of superannuation scheme to 15 April 2021 in light of the extension of the scheme by the Government, and amended its no action position for superannuation trustees to extend it until 31 December 2020.
See ASIC Corporations (Amendment) Instrument 2020/862, ASIC’s media release and also our previous Insight 'ASX and ASIC introduce emergency reforms in response to the impact of COVID-19 on ASX-listed entities' which covers the capital raising relief.
Temporary COVID-19 insolvency and bankruptcy relief extended to 31 December 2020
The following temporary insolvency and bankruptcy relief for distressed businesses affected by COVID-19 has been extended to 31 December 2020:
- the increase in the threshold at which creditors can issue statutory demands and the time companies have to respond to a statutory demand; and
- the relief for directors from personal liability for trading while insolvent in relation to debts incurred in the ordinary course of business.
Click here for the Regulations which give effect to the extension.
The extension is intended to prevent a further wave of business failures before businesses have the opportunity to recover. However, directors should note that the relief from personal liability for trading while insolvent does not relieve directors of their duty to act in the best interests of their company, or, if their company is insolvent or approaching insolvency, to take account of the interests of creditors, and to at all times act with due care and attention.
Senate Committee supports permanently allowing virtual AGMs, electronic communications with shareholders and electronic/remote signing and witnessing
The Senate Select Committee on Financial Technology and Regulatory Technology has published an interim report which makes 32 recommendations, including amending the Corporations Act and other relevant legislation to make permanent some of the relief that companies have been provided during COVID-19, including to
- allow companies to decide the best format for holding meetings, including AGMs (whether through virtual meetings, in-person meetings or hybrid meetings) while ensuring the needs of shareholders are taken into account;
- enable companies to communicate with shareholders electronically by default (retaining their right to opt-in to paper communications); and
- allow for the electronic signature and execution of legal documents and the witnessing of official documents by videoconference or other secure technological means.
The final report is due by 16 April 2021.
ALRC releases final report on Australia’s corporate and criminal responsibility regime
The Australian Law Reform Commission’s final report on Australia’s corporate criminal responsibility regime was tabled by the Commonwealth Attorney-General on 31 August 2020, and follows consideration of corporate liability mechanisms across 25 Commonwealth statutes and wide consultation with stakeholders across private industry, civil society and government.
- clearer distinguishing between civil and criminal methods of regulation (resulting in fewer criminal offences but the remaining criminal offences would recognise that expressive force of the criminal law to denounce particularly egregious conduct);
- introducing a new single test for attributing conduct to corporations to replace a range of existing statutory tests (which needs to be sufficiently broad to attribute responsibility for the misconduct of any one or more persons, regardless of whether they hold named offices or who is “functionally” responsible for the conduct and/or state of mind sought to be attributed);
- criminalising corporate systems of conduct or patterns of behaviour that result in multiple breaches of prescribed civil penalty provisions;
- support for the proposed new offence of failure to prevent foreign bribery;
- enhancing the range of penalties and sentencing options for courts with respect to corporate criminal offences, including beyond monetary penalties;
- the enactment of legislation to introduce deferred prosecution agreements; and
- the development of national policies and principles for the collection and dissemination of criminal justice data.
The report also sets out the ways in which directors and senior executives can be held liable for company misconduct. However, recognising current reform proposals being considered by the Government, the report does not yet make a case for reform to hold individuals liable in relation to corporate misconduct. See also the ALRC’s media release.
FIRB monetary thresholds for renewal or material variation of existing non-sensitive leasehold interests in developed commercial land re-instated
Recent amendments to the Foreign Acquisitions and Takeovers Regulations 2015 have the effect of reinstating normal monetary thresholds in relation to the renewal or material variation of existing non-sensitive leasehold interests in developed commercial land, where the same acquirer held a substantially similar interest under a lease on 29 March 2020.
The review thresholds that apply for renewals and material variations has now reverted to back to the following pre-COVID-19 thresholds:
- $0 for a foreign government investor;
- $1,192 million for a foreign person who is an agreement country or region investor; and
- $275 million for any foreign person.
For renewals or material variations of leasehold interests in sensitive developed commercial land, or where there is a change in the lessee, the $0 monetary screening threshold applies.
See FIRB’s Guidance Note 53 Temporary measures in response to coronavirus for further details.