Thinking | 1 April 2020
Holding AGMs during the COVID-19 crisis
The current coronavirus pandemic (COVID-19) has many entities with a 31 December financial year end rethinking their Annual General Meeting (AGM) arrangements for 2020. In light of the new COVID-19 gathering restrictions, entities must now consider either postponing their AGM or conducting it in a different way, such as holding a hybrid or virtual AGM.
What is a hybrid or virtual AGM?
A virtual AGM is a meeting that allows shareholders to attend, vote and ask questions at the AGM exclusively through an online platform. A hybrid AGM shares characteristics of both a traditional and a virtual AGM, allowing shareholders to attend the meeting at a physical venue or through an online platform. The general consensus used to be that hybrid AGMs were permitted under the Corporations Act 2001 (Cth) so long as details about the use of the online platform were included in the notice of meeting, while the position on the ability to hold virtual AGMs has remained somewhat less clear.
ASIC has recently released guidance (see 20-068MR – Guidelines for meeting upcoming AGM and financial reporting requirements) with respect to upcoming AGMs. Most importantly, ASIC has adopted a two-month ‘no-action’ position for public companies with a financial year end of 31 December 2019 that do not hold their AGM by 31 May 2020. This position means that ASIC will not take action against a public company with a 31 December financial year end that fails to hold its AGM by the end of May, provided the company holds the AGM by 31 July or such later date as ASIC advises.
Supplementing a notice of meeting
If a company has already sent a notice of meeting to its members, ASIC’s ‘no-action’ position also allows the company to add an online participation option to its AGM by giving supplementary instructions to its members by:
- electronic message (if the member has provided the relevant details);
- a notice on the entity’s website; and
- a market announcement if the company is listed on a market.
ASIC has confirmed that hybrid AGMs are permitted under the Corporations Act, but said that companies will need to review their constitution to determine whether it permits the use of technology to hold a meeting in this way.
ASIC has noted that there is some doubt about whether resolutions passed at a virtual AGM would be valid, and has said that ASIC does not have the power to modify the Corporations Act to facilitate virtual AGMs
However, ASIC’s ‘no-action’ position also applies to virtual AGMs, although it is conditional on the technology providing members as a whole with a reasonable opportunity to participate, in accordance with section 249S of the Corporations Act.
In ASIC’s view, this would include:
- members being able to ask questions of the auditor and about management; and
- voting occurring by poll rather than a show of hands.
Hall & Wilcox has extensive experience in advising listed and unlisted entities on all aspects of their AGMs. If you or your clients are impacted by COVID-19 and require assistance with AGMs, please contact us.
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