The Corporations Amendment (Meetings and Documents) Bill 2021 (Bill) received Assent on 22 February 2022. The long-awaited Bill makes permanent changes to existing requirements under the Corporations Act 2001 (Cth) (the Corporations Act) that will enable companies and registered schemes to use technology to hold meetings, execute company documents, and sign and distribute meetings-related documents.
'Technology neutral' execution
The changes introduced by the Bill give companies the option of executing certain documents electronically and remove ambiguity around this process.
The changes in Schedule 1 (Division 1 of Part 1.2AA) set out the requirements for how company documents (including deeds), and meeting related documents can be validly executed in a 'technology neutral manner'.
The Bill also amends existing requirements in ss 126 and 127 of the Corporations Act to make clear that documents will be able to be validly executed in accordance with the changes introduced by Division 1 of Part 1.2AA.
Other key changes to note include the following.
- Amendments to s127 of the Corporations Act which will mean that proprietary companies with a sole director and no company secretary will be able to use the statutory document execution mechanisms (which is currently not the case).
- Amendments to s126 of the Corporations Act which will permanently enable agents to make, vary, ratify or discharge contracts and execute documents (including deeds) on behalf of companies. There is no requirement for the agent to be appointed by deed.
Distribution of meeting-related documents to members
- The changes in the Bill make permanent the temporary changes in Treasury Laws Amendment (2021 Measures No. 1) Act 2021 relating to distribution of meeting-related documents. That is, changes to permanently enable documents relating to meetings to be signed and given electronically (regardless of the format in which the meeting will be held).
- The Bill will enable members to elect to receive documents in their preferred format – ie to elect to receive documents electronically or to receive physical copies or (or to elect not to be sent an annual report or any document prescribed in the regulations).
- The Bill also introduces a requirement for members to be notified of their right to elect to receive a document electronically or in physical form 'at least once' each financial year or for entities to make the notice 'readily available on a website' (s110K).
- The sender will be required to take reasonable steps to provide the member with the document or class of documents in the requested form (unless ASIC exercises its emergency powers under s1345 of Treasury Laws Amendment (2021 Measures No. 1) Act 2021 to grant relief).
Elections made before commencement of the Bill
- Sections 1687 D-H of the Bill make clear that where members that have notified a company or responsible entity that they wish to receive documents in physical or electronic form, or do not wish to be sent a copy of an annual report, prior to the commencement of the Schedule 2, there is no requirement for them to re-make their request – that is, their request will continue to have effect after the commencement of Schedule 2.
- If a member made a request to receive a full financial report prior to commencement of Schedule 2 then that request will also continue to have effect after commencement of the Schedule.
Electronic meetings: Hybrid yes, virtual (it depends…)
The changes introduced by the Bill will give companies and registered schemes the option of holding meetings in hybrid format. However, unlike the temporary measures now in place until 31 March 2022 (summarised), they will only have the option of holding wholly virtual meetings if they are expressly permitted to do so under their constitutions (ss 249R and 252P). This will mean that in most cases, companies and registered schemes will need to seek shareholder approval to amend their constitutions.
The Bill also clarifies (s111L) that companies registered as bodies corporate under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) may hold physical or hybrid meetings (or wholly virtual meetings, if permitted to do so under their constitutions).
[Note: It is worth noting that emergency powers introduced by Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (summarised) enable ASIC to grant relief (eg by enabling companies to hold wholly virtual meetings) in exceptional circumstances.]
A reasonable opportunity to participate
Regardless of the format in which the meeting is held, the Bill makes clear that 'members as a whole' must be given a 'reasonable opportunity to participate'. Section 249S of the Bill sets out what this may entail. Among other things, companies will need to ensure that the technology used is 'reasonable' and:
'allow the members who are entitled to attend the meeting, and do attend the meeting using that virtual meeting technology, as a whole, to exercise orally and in writing any rights of those members to ask questions and make comments'.
Requests for independent reports on polls
The Bill includes a new measure allowing a member or group of members of a company or registered scheme (with at least 5% of the voting power) to request to have an independent person appointed to observe and/or prepare a report on a poll conducted at a members meeting.
The company or responsible entity of a registered scheme will be required to take reasonable steps to appoint an independent person after receiving such a request.
The revised explanatory memorandum observes that:
'It is expected that where a company or registered scheme has an independent person observe and/or scrutinise and prepare a report on polls as part of their standard meeting practices this will satisfy these requirements and there will be no additional burden on these entities'.
Substantive resolutions to be decided by a poll
Votes on resolutions which are set-out in the notice of a meeting of members of a listed company will be required to be decided by a poll (not a show of hands). A listed company’s constitution will not be capable of providing otherwise.
The justification given in the explanatory memorandum is that
'these resolutions are usually substantive in nature and polls are more accurate, reliable and better reflects the voting power of all shareholders than votes which are conducted by a show of hands. A resolution will not be on a meeting notice paper if it is procedural in nature'.
Notice of meetings
- The Bill amends section 249J to ensure that members can be notified of meetings electronically.
- The Bill also updates the rules relating to when notices of meetings are taken to be received to state that electronic notices are taken to be received on the business day after they are sent.
Planned Reviews of changes to meeting requirements
Changes enabling virtual meetings will be rolled back in two years if certain requirements are not met:
- Section 1687J of the Bill requires that an independent review of the operation of both the temporary measures introduced by Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (which remain in effect until 31 March 2022) and the changes introduced by the Bill be conducted no later than the 'earliest practicable day after the end of 2 years after the commencement of Schedule 1 to the Corporations Amendment (Meetings and Documents) Act 2021'.
- A report on the review will need to be tabled in each House of Parliament within 15 sitting days after the report is provided to the Minister.
- If this does occur within this timeframe, then s1687K provides that the changes enabling virtual meetings introduced by the Bill will (ie sections 249R(c) and 252P(c)) will cease to apply.
Senator Jane Hume has also indicated that the government intends to conduct a separate '12-month opt-in review' of AGMs. Ms Hume said that the aim is to:
'encourage companies and shareholders to engage with technology with a view to considering whether future permanent reforms are needed to further support companies to effectively use technology to engage with their members'.
Senator Hume makes clear that these reviews are intended to allay concerns about the potential for changes to meeting requirements, and in particular changes enabling virtual meetings, to adversely impact shareholders.
The changes introduced by the Bill apply to documents sent and meetings held on or after 1 April 2022.
The Bill applies to documents executed on or after 23 February 2022 (the day after the Bill received Assent).