Hybrid General Meetings in the COVID-19 Landscape – An Interim Solution
Temporary laws enacted pursuant to the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination) to facilitate the use of virtual technology to hold general meetings electronically during the COVID-19 pandemic expired on 21 March 2021 and are no longer in force in Australia.
The Australian government has proposed to extend the measures in the Determination in the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021) (Bill). The Bill was passed by the House of Representatives on 17 March 2021 but is still awaiting debate in the Senate.
This has left many companies in a confused and awkward position regarding hosting their annual and extraordinary general meetings, given the ongoing impact of COVID-19 in Australia – with various states and territories enforcing temporary lockdowns, and being subject to other ever changing government-imposed restrictions on public gatherings. All of this has a significant bearing on companies’ ability to hold general meetings.
On 29 March 2021 ASIC announced that it has adopted a ‘no action’ position in relation to companies conducting their general meetings electronically. However, it is not clear that this will validate corporate actions taken or approved at purely online electronic meetings for the purposes of the Corporations Act 2001 (Cth) (Corporations Act). For instance, a company may be vulnerable to claims from shareholders regarding the validity of resolutions or actions passed at an electronic general meeting.
So, what should companies do to navigate this landscape to ensure they hold their general meetings in a manner that is appropriately accessible to shareholders, while still compliant with the current law?
So, what is the current applicable law?
Companies can look to their constitutions, as well as the Corporations Act, for guidance on what is currently permitted in relation to general meetings.
Section 249R of the Corporations Act provides that ‘a meeting of a company’s members must be held at a reasonable time and place’. Section 249S of the Corporations Act provides that ‘a company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate’.
In the absence of conflicting provisions in a company’s constitution, companies can rely on the above provisions in the Corporations Act. Any additional provisions in a company’s constitution should also be considered carefully (i.e., the quorums for shareholder meetings, time and place of meetings, means of conducting meetings, and so forth).
Suggested interim approach: hybrid meetings!
In circumstances where companies are unable to conduct a traditional physical meeting (due to COVID-19 restrictions), they may be best served by conducting general meetings by adopting a hybrid approach: including both a small physical attendance component and an electronic means for the majority of attendance at the meeting.
To facilitate this, companies should first analyse their constitution to determine what the required quorum of shareholders is for general meetings. For the majority of companies, this will typically be 2 or 3 shareholders present in person or by proxy, attorney or representative.
Once this is ascertained, companies should hold their hybrid general meeting as follows:
- A physical meeting should be held at a permitted location (within current applicable COVID-19 restrictions), and the minimum quorum of shareholders (or as many as are permitted within the current applicable COVID-19 restrictions) should be present at the physical meeting, together with so many of the company’s board and other officers involved in conducting the meeting as are permitted by the COVID-19 restrictions.
- An electronic means for attending the meeting should be facilitated for all other shareholders via a virtual platform (such as Zoom or Microsoft Teams). The virtual platform should be hosted and facilitated by the company’s board and other officers from the physical location of the meeting.
The virtual platform should permit shareholders to see and hear those speaking at the meeting, and to ask questions and vote online. The Chairman of the meeting should require that all resolutions are conducted and determined on a poll. This is now an ASX requirement in any event. It is our view that resolutions passed at the meeting in this manner will be valid resolutions of a company’s shareholders.
Some tips and tricks
We recommend that, where applicable, companies intending to conduct a hybrid meeting should:
- ensure that a representative from their auditors attends the meeting (electronically if not physically) and that they will scrutineer each poll;
- make a public announcement clearly explaining the meeting arrangements to shareholders (particularly in the circumstance where a notice of meeting has already been despatched and the arrangements have to subsequently change due to a shift in the applicable COVID-19 restrictions);
- implement a pre-registration link within the company website, where shareholders can register their attendance for the meeting – both for the physical component (this will allow companies to monitor and manage the proposed attendance in accordance with COVID-19 imposed limits), and for the electronic component (to enable shareholders to be issued with a participation link and login details);
- encourage shareholders to vote by proxy prior to the meeting (proxy votes received before the meeting should be calculated and tallied before the meeting takes place); and
- properly establish and test a mechanism within the chosen virtual platform to ensure that it works and allows participating shareholders to vote on resolutions in real time, and that these votes can be tallied alongside the prior received proxy votes. Share registries offer various services in this regard, which can be helpful to companies and should be explored.
In summary, while extensive market confusion exists around the means by which general meetings are conducted in the current COVID-19 landscape, resolutions passed at a hybrid meeting in the manner set out above will be valid resolutions of a company’s shareholders.
If you have any questions about this article, please get in touch with an author, or any member of our Corporate & Commercial team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.