Depending on how the impacts of COVID-19 unfold, ASIC is providing relief in relation to AGM obligations under the Corporations Act 200 (“the Act”) in a number of ways:
- providing temporary relief to corporate entities (either as a whole or those in certain classes/meeting certain criteria) from the obligation to hold an AGM within 5 months of the end of the entity’s financial year (for example, by extending that time period);
- amending the provision relating to the holding of AGMs at multiple venues via technological means provided members are given a reasonable opportunity to participate;
- specifying that the Act’s requirement for meetings to be held at a reasonable time and place encloses online or electronic locations or domains; and
- amending the provisions of the Act such that corporate entities are able to hold hybrid and/or virtual AGMs notwithstanding the lack of such provisions in their constitutions.
Currently, social distancing requirements and the government-enforced restrictions on both travel and public gatherings has resulted in significant difficulties for public entities complying with their obligations under the Act. In particular, their obligation to hold an AGM within five (5) months of the end of their financial year. Entities with their financial year ending on 31 December should be wary as the deadline of 31 May to have held an AGM is fast approaching. Fortunately, owing to challenges presented by Covid-19, alternatives have been identified to assist entities in meeting their obligations in regard to AGMs in the context of the pandemic.
What are your current options?
Virtual AGMs seem to be the most attractive option and these can be conducted by online or telephonic means. ASIC has taken the position that hybrid AGMs are permitted under the Act provided this is not in conflict with the company’s constitution. Importantly, ASIC does not have the power to modify the Act in allowing for hybrid AGM’s where they not permitted within the relevant company’s constitution.
Decision makers will need to have close regard to their entity’s constitution in deciding how to proceed with the AGM. Given the difficulty this may cause some companies in complying, ASIC announced that it intends to take no action on non-compliance with the Act’s provisions that restrict the holding of virtual AGMs up to the statutory deadline of 31 May 2020 and for a further 2 month extension period from that date (until July 31 2020). They have also indicated that this period is subject to a further possible extension depending on circumstances.
Participation in virtual AGMs
Importantly, ASIC’s no-action position on virtual AGMs is subject to entities meeting the Act’s requirement of providing members as a whole with a reasonable opportunity to participate in the AGM. If an entity elects to hold a virtual AGM, they should ensure the following:
- that auditors “attend” the electronic meeting and that members have an adequate opportunity to ask questions of auditors;
- that members have an adequate opportunity to ask questions about the entity’s management; and
- that voting occurs via a poll (or, if available in the constitution, direct voting facilities online prior to the AGM) rather than via a show of hands.
If entities lack adequate technological capacity to hold a virtual AGM, they should postpone and work to establish capacity for a virtual or hybrid AGM at a later date.
Process for postponing AGMs
During these uncertain times, ASIC is also providing entities with the option to utilise both aspects of their no-action position i.e. postpone their AGM and then hold the postponed meeting as a virtual AGM. It should be noted that this does not preclude members or other third parties from commencing private actions regarding the deferral or postponement of an AGM.
Public companies who require an extension of time beyond 31 July 2020 to comply with their AGM obligations can apply directly to ASIC for a further extension of time pursuant to the Act. ASIC will be inclined to grant an extension if:
- the inability of a company is to how its AGM on time is due to factors beyond its control; or
- ASIC is persuaded that it is in the interests of the shareholders to do so.
Where an extension of time is sought due to restrictions on gatherings which are currently enforced, the first test will almost certainly be met, and the second is also likely to be satisfied on the basis that it is in the interests of members to have a delayed AGM
in which they have an adequate opportunity to fully participate.
Application for further extensions must:
- be made before the end of the time period within which the applicant entity would otherwise be obliged to hold an AGM (so in the case of entities with a balance date of 31 December 2020 that is May 31 2020, and not the extended period ending 31 July 2020); and
- be lodged in advance to give ASIC sufficient time to consider the application and to allow the company to hold the AGM by the due date if the application is refused.
If the application is granted, ASIC will specify the time period for extension which has been granted and the company is then obligated to hold the AGM within this extended time period. Unlike reliance on the ASIC no action position, an extension granted pursuant to an application as detailed above has the advantage of ensuring no breach of the Corporations Act has occurred and thus removes any claims by members or other third parties.
As prohibition on large gatherings is likely to be ongoing until at least 31 July 2020, entities should postpone the AGM with the aim of ultimately planning to hold a virtual or hybrid AGM for 2020 and utilise the time granted by a delay to make adequate practical and technological infrastructure arrangements for such a meeting.
Notice of Meeting issued
Where an entity has issued a notice of meeting pursuant to the requirements of the Act for an AGM scheduled to be held prior to 31 May 2020, ASIC’s no-action position covers any supplementary notice to members providing instructions for online participation in the AGM, provided such a notice is sent at least two (2) business days before the meeting is held via email, publication of notice on the entity’s website and making of a market announcement. *Note that all 3 elements are required for the notice to enable the entity to rely on ASIC’s no action position).
An entity that has issued an AGM notice may also elect to postpone the AGM if its constitution permits it to do so. However, the postponed AGM must still be convened within the s 250N timeframe, so an entity that seeks to postpone an already scheduled AGM will need to rely on ASIC’s no action position and/or an individual extension granted via application as above.
Where the entity’s constitution does not include such a power, the entity may notionally commence its AGM and then adjourn it to a later date. The specifics of adjournment will be governed by the entity’s constitution. Again, an entity in this position will need to rely on ASIC’s no action position and/or an individual extension granted via application.
Where to next?
ASIC’s current no-action position with regard to both virtual AGMs and postponements operates until 31 July 2020 and thus is intended to address the immediate situation facing companies with a 31 December balance date. ASIC has indicated that it intends to monitor the position with respect to AGMs for entities with a balance date of 31 March or 30 June and will provide further updates as required.