Given the uncertainty with COVID-19 at the present time there are a number of options that companies need to consider when contingency planning for their Annual General Meeting (AGM).
The Governance Institute of Australia (GIA) together with the Australasian Investor Relations Association (AIRA) have joined the Australian Securities and Investments Commission (ASIC) and the Australian Charities and Not-for-profits Commission (ACNC) in issuing guidance on the impact of COVID-19 on company meetings, particularly AGMs.
AGM contingency planning
A number of options exist for companies when considering contingency planning for their AGM:
- adapt the basis on which the AGM is held;
- delay convening the AGM if notice has not yet been issued;
- postpone the AGM, if permitted by the company constitution;
- adjourn the AGM;
- apply to ASIC for an extension of time to hold the AGM;
- conduct a hybrid AGM if permitted by the company constitution;
- rely on ASIC’s ‘no action’ position to conduct an online AGM, or to hold the AGM up to two months past the prescribed deadline; or
- use a combination of the above.
In all cases forward planning is essential and will require the company to work in concert with its venue provider, technology partners, registry (where applicable), auditor and other relevant persons as required.
Adapting the basis on which the AGM is held
Customary meeting protocols may be adapted to provide for an effective AGM. Detailed contingency planning and clear and effective communication to shareholders/members will be critical to ensure shareholder/member rights are observed, constitutional requirements are satisfied and public safety maintained.
Potential adaptations to customary protocols include:
- the use of alternate or supplementary venues, including simultaneously holding physical and online meetings (hybrid AGM model), or conducting the meeting wholly online via live streaming (noting that live streaming will not constitute formal attendance at the meeting);
- encouraging direct or proxy voting, establishing systems for the submission of questions in advance, and restricting the number of non-shareholder/non-member attendees; and
- dispensing with the usual provision of refreshments and other complimentary offerings before and after the meeting.
With regard to virtual-only meetings, the current position in Australia is that such meetings are not viable given they may not constitute valid meetings.
ASIC’s no-action position in relation to companies holding online AGMs means that, while the no-action position remains in place, ASIC will not take proceedings against a company for holding an online AGM even though it does not comply with the technicalities of the Corporations Act 2001 (Cth) (Act).
Notwithstanding ASIC's no-action position, options should be carefully considered to ensure that the requirements of the company’s constitution and the Act are met.
If the company has not already issued its meeting notice, the company may consider including a special resolution in the notice of meeting to update the constitution to permit hybrid and online meetings, direct voting or other adaptions.
Delaying, postponing or adjourning the AGM
The latest date to hold an AGM is five months after the financial year. Companies with a 31 December balance date currently have particularly tight deadlines within which to plan for delays, postponements or adjournments.
Given the uncertainty with COVID-19 at the present time, companies with 30 June balance dates should also begin considering the appropriateness of adapting, delaying, postponing or adjourning their AGMs.
Considerations for companies delaying, postponing or adjourning their AGMs include:
- annual authorities–authorities approved at the previous AGM may expire during the delay period;
- dividends– a delay in holding the AGM may mean that the company’s final dividend is not paid on the expected date. A payment of an interim dividend may need to be considered; and
- remuneration report– the business of the AGM for listed companies must include an advisory vote on their remuneration report, and therefore the deadline for holding the AGM effectively applies to those requirements as well.
In all cases the company should be cognisant of the powers enshrined in its constitution. For a company whose constitution does not include a power to postpone its AGM, there are a number of procedural solutions available such as ‘commencing’ the AGM and then adjourning it to a later date.
Alternatively, a company may apply to ASIC for relief, obtain a Court extension or may consider reliance on ASIC’s no action position if the postponement is to a date after the AGMs prescribed deadline.
Given that public companies (as defined in the Act), can apply to extend the time within which they hold their AGM under section 250P of the Act, smaller public companies such as companies limited by guarantee may find that applying for an extension is a practical solution.
Notices of meeting
Contingency options available to companies will turn, in part, on whether notices have been issued yet or not.
As noted above, if the notice has not yet been issued special resolutions may be included in the notice to update constitutions to permit alternate meeting methods. If the notice has been issued without referring to supplementary venues or changed conditions, appropriate announcements and website updates can be used to inform shareholders/members.
Additional considerations for registered charities
Companies which are registered with the ACNC must also consider their obligations under the ACNC’s Governance Standards (Standards), and should note that certain provisions of the Corporations Act 2001, including sections relating to meetings of members, are turned off to avoid duplicating the Standards[1].
In order to address Governance Standard 2 “Accountability to Members”, charities are obliged to inform their member base about the charity’s activities and what the results of those activities are. The obligation extends to allowing members to raise concerns and ask questions about how a charity is run, particularly at the AGM. Most charities comply by holding an AGM.
Charities will need to carefully consider whether to hold an AGM so that the company’s constitution and the Standards are met.
Supplementary events to the AGM
The AGM need not be the only event in which the directors engage with shareholders/members. As notes the guidance, an event held later in the year, particularly for retail investors, may be an appealing method of reconnecting with the shareholder/members base at a time when the threat to public safety of COVID-19 has abated.
Further information
The GIA / AIRA guidance document Guidance – COVID 19 and the impacts on AGMs, (produced with the assistance of the Business Law Section of the Law Council of Australia)
ASIC’s Media Release 20-068MR Guidelines for meeting upcoming AGM and financial reporting requirements
The ACNC’s guidance on Charity operations and COVID-19
If you require further information please contact Andrew Parlour, Jonathan Teh, or Rory Maguire.
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[1] Specifically Part 2G.2 (other than sections 250PAA and 250PAB); and Part 2G.3, to the extent that it relates to meetings of the body corporate's members