On 25 June 2021, the government released exposure draft legislation for consultation – [exposure draft] Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments – proposing to permanently enable electronic execution of company documents, distribution of meeting-related materials and use of technology in meetings.
The deadline for submissions is 16 July 2021.
The draft Bill proposes to permanently enable electronic execution of company documents. This would mean that, when a company executes a document:
- persons signing would be able to do so electronically provided that: 1) that the copy includes the entire contents of the document; 2) 'a method must be used to identify the person and indicate their intention to sign the document'; and 3) 'the method must be as reliable as appropriate for the purposes for which the document was generated or proven in fact to have indicated the person’s identity and intention'.
- split execution would be allowed ie persons required to sign a document, could sign separate copies of the document. The document would not need to include the signature of any other person.
- the document could be executed by the sole director of a proprietary company that does not have a company secretary.
- the fixing of the seal could be witnessed electronically. The person witnessing could do this by using technology (eg videoconferencing) to observe the fixing of the seal, signing the document (or a copy or counterpart of the document) and annotating it with a statement confirming that they have observed the fixing of the seal electronically.
The draft Bill also proposes to permanently give companies the option to hold hybrid meetings should they wish to do so. Companies would only have the option to hold wholly virtual meetings, where this is 'expressly permitted or required' in their constitution.
The draft explanatory memorandum states:
'The new law is not prescriptive about how a meeting should be conducted. It does not mandate a particular format for a meeting or a particular way in which a show of hands or a vote on a poll is to be conducted. It recognises that the meeting rules apply to a broad range of companies, from small not-for-profit companies to large listed companies, and allows each company to select the format for the meeting that is most appropriate for that company'.
However, it makes clear that 'members as a whole' must be afforded a 'reasonable opportunity' to participate, with a court able to declare a meeting invalid where it considers that 'a substantial injustice has occurred' and where this cannot be remedied by a Court order.
The draft explanatory memorandum includes a non-exhaustive list of factors relevant to considering whether 'members as a whole' have had a reasonable opportunity to participate. These include (among other considerations):
- whether the meeting is held at a 'reasonable' time and place
- where the meeting is a hybrid or virtual meeting, that the technology used is reasonable
- whether, where members have a right to speak/comment/ask questions at a meeting (eg under sections 250S and 250T of the Corporations Act 2001 (Cth)), they are able to do so 'either orally or in writing'
- whether documents tabled in meetings are made 'reasonable accessible to members as a whole either before or during the meeting'.
The draft explanatory memorandum states that other factors may also be relevant, suggesting for example, that 'directors should consider in what circumstances the right to participate also includes a right to be seen'.
Distribution of meeting-related documents
- The draft Bill proposes to make permanent the changes in Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 relating to distribution of meeting-related documents. That is, to permanently enable any documents relating to meetings to be signed and given electronically (regardless of the format in which the meeting will be held).
- It's proposed that a document may be provided electronically either by: a) giving the document to the person by using electronic means (eg by email); or b) providing the person with details 'sufficient to allow them to view or download the document electronically' eg by giving them a card, emailing them a link to a website.
- Importantly, it will not be compulsory to receive documents in electronic form. Documents will only be able to be provided electronically if: a) it is reasonable to expect the document will be 'readily accessible so as to be useable for subsequent reference at the time the document is given'; and b) the individual receiving the document has not opted to receive it in hardcopy.
It's proposed that minutes may be recorded and kept electronically 'if it is reasonable to expect that the information would be readily accessible so as to be usable for subsequent reference'.
Two year review
The draft Bill proposes a review of the changes to meeting and electronic communication requirements 'no later than the earliest practicable day after the end of two years'.
Independent scrutiny of polls
- The draft Bill also proposes to enable a member or group of members with 6% or more 'voting power' to 'require a listed company or registered scheme to appoint an independent person [eg the auditor of the company or registered scheme unless they would have a conflict of interest] to observe or report on a poll'.
- If the request relates to the observation of a poll then the request would need to be made no later than five business days before the meeting.
- If the request relates to a report on a poll, it's proposed that the request could be made up to five business days after the meeting.
- Companies/responsible entities would be bound to take 'reasonable steps' to action the request.
- Once completed, the independent report would need to be made available to members 'within a reasonable time'. In line with the requirements for keeping a record of meeting minutes, the company or responsible entity would be required to keep a record of the report.
- The company or responsible entity of the registered scheme would be responsible for paying any fees associated with appointing the independent person.
- Failure to take reasonable steps to: a) appoint an independent person; b) provide access to information to that person if requested; c) publish the report; or d) keep a record of the report would be a strict liability offence. The maximum penalty would be 40 penalty units. The draft explanatory memorandum states that this is appropriate because 'it is necessary to strongly deter misconduct that can have serious detriment for members'.
Proposed timing – how would these changes fit with the proposed changes already before parliament?
- If passed in its current form, Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (TLA 1 Bill) which is currently before parliament, would temporarily enable companies and registered schemes to hold virtual or hybrid meetings and to electronically sign documents until 15 September 2021. You can find a summary of the Bill here. A short overview of the current status of electronic meetings/execution is here.
- The proposed changes in Schedule 1 of the draft Bill (if passed) would not alter this – ie companies would continue to be able to hold wholly virtual meetings until the sunset date in TLA 1 Bill (if the TLA 1 Bill is passed).
- It's proposed that the measures concerning hybrid meetings and use of technology to facilitate meetings in the draft Bill (if passed), would apply permanently from 15 September 2021.
- The explanatory memorandum states that should the TLA 1 Bill fail to pass, 'work' is 'being undertaken to ensure that these amendments can be progressed in the Spring sitting period'.
- It's proposed that the changes to extend the statutory mechanism for the execution of company documents to all single director companies in Schedule 2 of the draft Bill will apply to documents that are executed on or after the commencement of the draft Bill.
[Source: Treasury Consultation: Using technology to hold meetings and sign and send documents; [exposure draft] Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments; [exposure draft] explanatory memorandum]