COVID-19: ASIC updates regulatory position on financial reporting deadlines and Annual General Meetings

By Deborah Chew

ASIC recently published new regulatory guidance for listed and unlisted entities as a further response to the challenges that are being posed by the COVID-19 pandemic. The measures, announced on 13 May 2020, extend the time by which financial reports are required to be lodged with ASIC and sent to members, as well as the time by which Annual General Meetings are required to be held.

Reporting relief

Under normal circumstances, disclosing entities and registered managed investment schemes must lodge audited financial reports with ASIC within three months after their financial year end. All other entities that are required to lodge financial reports with ASIC must ordinarily do so within four months of their financial year end.

In April 2020, ASIC provided relief to unlisted entities with financial year ends from 31 December 2019 to 31 March 2020, to give them an extra month to lodge their annual financial reports with ASIC (that is, four months for unlisted disclosing entities and unlisted registered schemes, and five months for all other entities). This relief didn’t apply, however, to listed entities or to unlisted entities whose financial year ended after 31 March 2020.

ASIC has now extended the deadline for both listed and unlisted entities (including managed investment schemes) to lodge financial reports under Chapters 2M and 7 of the Corporations Act 2001, where the entity’s financial year ends on a date up to 7 July 2020[1].

This latest relief allows for the following:

• unlisted entities and unlisted registered schemes will now be able to take one additional month to lodge financial reports for financial year ends from 31 December 2019 to 7 July 2020; and
• listed entities and listed schemes will be able to take one additional month to lodge their full-year and half-year financial reports for 21 February 2020 to 7 July 2020 balance dates, provided that any reliance on the extension is disclosed to the market, ideally with an accompanying explanation of the reasons for doing so.

ASIC has also granted an extension for reporting to members, with public companies now allowed to send their annual report to members by the earlier of 21 days before the next AGM after the end of the financial year or five months after the end of the financial year, and registered schemes (whether listed or unlisted) now allowed to send their annual report within four months after their financial year end.

The extended deadlines will not apply for listed or unlisted entities with balance dates to 7 July 2020 where the reporting deadline has already passed.

As ASX is currently assessing applications for extended financial reporting deadlines on a ‘case-by-case’ basis, listed entities should be aware that the automatic extension from ASIC does not at present mean that their ASX reporting obligations have been modified. However, we anticipate that ASX may shortly update its position to reflect the new ASIC guidance, and that in any event, the ASIC extension seems likely to make it simpler to obtain case-by-case relief from ASX.

In relation to financial reporting periods ending after 7 July 2020, ASIC has indicated that it will continue to monitor how market conditions and COVID-19 developments are affecting financial reporting and AGM obligations for these balance dates.

Annual General Meetings

Extension of ‘no action’ position

ASIC announced in March that it had adopted a ‘no action’ position in respect of entities with a financial year ended 31 December 2019, to allow them to delay holding their Annual General Meeting (AGM) for two months, until the end of July 2020. ASIC has now broadened this ‘no action’ position to encompass entities with financial year ends up until 7 July 2020.

Under the Corporations Act 2001 (Cth), public companies are required to hold an AGM within five months of their financial year end at least once every calendar year. However, given the present circumstances, many entities with financial years ending from 31 December 2019 to 7 July 2020 may find it difficult to hold their AGM by this statutory deadline.

To address this, ASIC has said that it will not take any action if these public companies do not hold their AGMs within five months after the end of their financial year, so long as they do so within up to seven months after their financial year end. For public companies with 1 June 2020 to 7 July 2020 year ends, the ‘no action’ position also applies where holding an AGM in January or February 2021 results in the requirement to hold an AGM in the 2020 calendar year not being met.

Guidance on the use of technology for meetings

On 5 May 2020, Federal Treasurer Josh Frydenberg issued the Corporations (Coronavirus Economic Response) Determination No. 1 2020 (Determination), which stipulates that entities that are required or want to hold a meeting of members, such as an AGM, are able to do so ‘virtually’ (that is, online by using technology, instead of in a physical location).

The Determination is effective until 5 November 2020, and requires that the one or more technologies used by the entity give all persons entitled to attend a reasonable opportunity to participate without being physically present in the same place. A detailed exploration of the Federal Treasurer’s Determination on these issues can be found here.

In response to these developments, ASIC has issued guidance to set out its views on the appropriate approach to calling and holding meetings virtually or in a hybrid format (where some members participate online and others are at a physical location). The guidance outlines, among other things, that:

• members at a hybrid or virtual meeting should be given an opportunity to participate in the meeting that is equivalent to the one they would have had if attending in person, including being able to ask questions live and engage in debate over resolutions during the course of the meeting regardless of whether they are participating in person or virtually;
• all voting at a virtual or hybrid meeting should be by a poll rather than a show of hands, and members should be able to cast a vote live during the meeting via virtual technology in the same way that they would if they attended in person;
• where practicable, voting online or by other means should also be available before the meeting, for the convenience of members who do not otherwise intend to participate;
• the notice-of-meeting should include clear explanations of how to use the technology to observe, vote, make comments and ask questions; and
• if technical problems result in a number of members being unable to reasonably participate, the meeting should be adjourned until the problem is fixed.

Hall & Wilcox has extensive experience in advising listed and unlisted entities and schemes on all aspects of their AGMs and other member meetings. If you or your clients are impacted by COVID-19 and require assistance with any member meetings, please feel free to contact us.

[1] For listed entities and schemes, these changes were implemented on 15 May 2020 through the ASIC Corporations (Extended Reporting and Lodgement Deadlines - Listed Entities) Instrument 2020/451. For unlisted entities and schemes, the application of the extension to entities and schemes with financial years ended after 31 March 2020 was implemented on 19 May 2020 through the ASIC Corporations (Amendment) Instrument 2020/452 (which among other things, amends the ASIC Corporations (Extended Reporting and Lodgement Deadlines - Unlisted Entities) Instrument 2020/395).