AGM season 2021 is fast approaching – what should you be thinking about?
Update: the article below contains reference to ASIC’s ‘No Action’ position on the holding of virtual meetings expiring on 31 October. Subsequent to this article being published, amendments to the Corporations Act 2001 (Cth) made by the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 expressly allow for the holding of virtual meetings (at least, until 31 March 2022). See our article for a more detailed summary.
It is that time of year again, with the 2021 AGM season now fast approaching. With the continued logistical challenges arising from the COVID-19 pandemic, it is more important than ever to be on the front foot with planning your company’s AGM. How the meeting will be held, the matters to be put to shareholders and the various meeting requirements that will need to be complied with should be considered as far in advance as possible to ensure you’re well prepared for the 2021 AGM.
We have set out a number of key matters to help you prepare for your upcoming AGM.
Ordinarily, a company’s AGM must be held within five months of the end of its financial year (by 30 November for companies with a 30 June financial year end). However, ASIC has extended its ‘No Action’ position on AGMs which now allows for companies to hold their AGMs up to seven months after year end for financial years ending as late as 7 July 2021 (ie meeting to be held by 31 January 2022 for companies with a 30 June 2021 financial year end). The proposed date for your company’s AGM needs to be determined well in advance so proper planning can occur, and it’s also critical to check the company constitution to ensure any other timing requirements are adhered to.
2. Announce the date of the AGM and closing date for director nominations
A listed entity must announce the date of its AGM and the closing date for director nominations via ASX at least five business days before the closing date for receipt of nominations for the election of directors. ASX has clarified that this can be done by giving ASX a ‘corporate calendar’ which sets out these dates, as well as any other key dates the company wishes to include.
This announcement is made once planning for the timing of the AGM is finalised and is separate to the release of the full notice of the AGM, and so can be easy to overlook.
3. Consider the requirements of virtual or hybrid meetings
Given the impact that COVID-19 continues to have on all aspects of life, many companies will be considering holding either a hybrid or entirely virtual AGM. Given the current tendency for Australian states to impose ‘snap lockdowns’, hybrid and in-person meetings can become problematic if the meeting date falls within a lockdown period and there is insufficient time (taking into account the notice requirements of the constitution) to provide members with details of the updated ‘virtual location’ (or in the case of a hybrid meeting, that there can no longer be physical attendance). For this reason, we recommend that companies consider holding wholly virtual AGMs where possible (subject to the regulation referred to below).
Whichever form of meeting you choose, you will need to ensure that your constitution allows for it and that shareholders are clearly informed as to how they can take part, as all shareholders must be given a reasonable opportunity to participate in the meeting.
You may well have already held a virtual meeting and so be very comfortable doing so again. If not, from a practical perspective you should ensure you closely liaise with your advisors and share registry and have tested the technology being used ahead of the meeting itself.
ASIC’s current ‘No Action’ position for holding virtual meetings is due to expire on 31 October (or earlier, if legislation on the matter is passed before then), so if your AGM is to be held after that date, you will need to ensure that you are up to date with the current regulatory requirements that apply to hybrid and virtual meetings.
Our previous article, ‘Electronic meetings and electronic execution of company documents are (hopefully) here to stay' (July 2021), discusses the position on hybrid and virtual meetings in more detail.
4. Confirm the position on polls vs show of hands
If you are holding a virtual or hybrid meeting in reliance on the current ASIC ‘No Action’ position, voting must be by poll rather than by show of hands. In any event, ASX (through Guidance Note 35) has also stated that voting on all Listing Rule resolutions should be by poll rather than a show of hands, so this can be considered the preferred position.
Your constitution may have requirements in this regard that will also need to be complied with. It may also be prudent to consider whether any changes to your constitutional provisions on voting are required in light of the above positions taken by ASIC and ASX respectively.
5. Check for any required resolutions
In addition to the usual AGM resolutions (remuneration report and director rotations and elections), remember that:
- if a strike was received against the remuneration report at last year’s AGM (ie 25% or more voted ‘no’), you need to be prepared for a spill resolution in the event that a second strike is received;
- if it has been three years since your employee equity plan(s) and/or proportional takeover provisions were renewed, these should be renewed again – also, be aware that where amendments have been made to the terms of your company’s employee equity plans, this may result in shareholder approval being required notwithstanding it’s been less than three years since they were last approved;
- if you have issued equity securities during the past 12 months, these should be considered for ratification to preserve placement capacity under Listing Rules 7.1 and 7.1A;
- for companies with a market capitalisation of less than $300 million or who are not in the S&P/ASX300 Index, you should consider seeking approval under Listing Rule 7.1A for an additional 10% placement capacity;
- as mentioned above, if your constitution does not currently permit virtual or hybrid meetings, you may wish to consider amending it to provide for these, to provide greater flexibility for future meetings; and
- if your constitution does not include the escrow provisions required by Listing Rule 15.12, you should consider amending it so as to ensure the required provisions are in place well ahead of any potential front or back door listing or acquisition of classified assets to which ASX escrow will apply.
6. Confirm who can vote
Careful consideration should be given to who can vote on each resolution proposed at the AGM. Mandatory voting exclusions will apply to some resolutions (eg in relation to management remuneration) and steps will need to be implemented to ensure the voting exclusions are complied with.
7. Allow time for ASX and ASIC consultation on the notice of meeting (if required)
Depending on the types of resolutions being put forward at the meeting, your notice may need to be submitted to ASX, ASIC, or both, for review. As part of your AGM planning, you should ensure that there is sufficient time allowed for this review to be undertaken.
8. Delivery of AGM notices
To facilitate the delivery of notices of meeting more effectively in the current environment, ASIC has issued a ‘No Action’ position in relation to the sending of a notice using technology. However, this position is due to expire on 31 October (or earlier, if legislation on the matter is passed before then), so if your AGM is to be held after that date, you will need to ensure that you are up to date with the current regulatory requirements that apply to the despatch of notices of meeting. Our previous article discusses the position on electronic delivery of notices of meeting in more detail.
Hall & Wilcox has extensive experience advising listed and unlisted companies on all aspects of their AGMs, including virtual meetings. If you require any assistance with the holding of your AGM, please contact us.
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