Key takeouts
Overview
Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 Bill (TLA 1 Bill) received Assent on 13 August and is now in force. The legislation as passed, is substantially the same as the Bill originally introduced, with some key exceptions which we've highlighted below. You can find our summary of the Bill (as originally introduced).
Key reforms
For context, Treasury Laws Amendment (2021 Measures No. 1) Act 2021 ultimately does two things.
First, the changes in Schedule 1 temporarily enable companies to execute documents, hold meetings, provide notices relating to meetings and keep minutes using electronic means until 31 March 2022 (rather than the 15 September 2021 as originally proposed).
After this point, the government intends that permanent changes will be in place. These changes are included in a separate (and as yet still draft) Bill that has not yet been introduced: [exposure draft] Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments (summary).
Importantly, if permanent changes are not in place when the changes in Schedule 1 expire, we will (in theory) not see a repeat of the legislative uncertainty around convening meetings and execution requirements that has prevailed since the expiration temporary relief in March this year.
This is both because:
- the legislation introduces new emergency relief powers for ASIC that enable the regulator to grant short term relief on an individual or class basis (which is discussed in more detail below); and
- separate legislation has been enacted that temporarily (until 31 December 2022) enables the Minister to make a determination to change arrangements for documentary requirements under Federal legislation, including requirements concerning the giving of information and the signature, production and witnessing of documents on a forward or backward looking basis.
Second, the changes in Schedule 2 introduce permanent changes to existing continuous disclosure requirements. In broad terms, the changes will mean that all civil penalty proceedings brought under the continuous disclosure and misleading and/or deceptive conduct provisions, will need to establish that an entity or officer was at fault – ie that the entity or officer acted with 'knowledge, recklessness or negligence' - in order to establish a contravention.
The permanent introduction of a 'fault' element is expected to insulate companies and their officers from the threat of 'opportunistic' litigation, while ensuring the market is kept informed of material information – an approach the Treasurer has described as striking the right balance.
In a statement welcoming the passage of the changes to continuous disclosure requirements in particular, Australian Institute of Company Directors CEO and Managing Director Angus Armour said,
'This reform provides greater certainty for companies to make disclosures to the market, without the apprehension of speculative class actions challenging this disclosure with the benefit of hindsight, and that is in everyone’s interest. We are hopeful that overtime these changes will also help to rebalance skyrocketing insurance premiums'.
Support for the changes has not however been unanimous. The Australian Shareholders' Association has issued a statement raising concerns about the impact that the changes will have on shareholder rights.
Key Parliamentary amendments made to the Bill
Important changes to Schedule 1
- Extension of relief: As flagged above, the measures in Schedule 1 will apply until 31 March 2022, rather than 15 September 2021 as originally proposed.
- Election to receive documents in hardcopy only: The legislation as passed does not include the requirement (in the initial draft Bill) for companies and registered schemes to notify members of their right to elect to receive documents in hard copy. The supplementary explanatory memorandum states that this is intended to ensure that the Bill 'does not impose onerous obligations on companies and registered schemes, particularly in the context of the ongoing disruptions caused by COVID-19'.
New Part 1: New (permanent) ASIC emergency relief powers
The Act also introduces new emergency relief powers for ASIC that enable the regulator to grant temporary relief from certain Corporations Act requirements in exceptional circumstances (eg COVID-19). More particularly, ASIC has the power to:
- Make a determination extending the timeframe for companies to hold an AGM on a class basis where the regulator considers that it 'may be unreasonable to expect the companies in the specified class to hold AGMs within the time required under section 250N because of a situation that is beyond the control of the companies in that class'. The supplementary explanatory memorandum explains that the new determination making power only applies to classes of public companies because there is already an individual relief power in section 250P of the Corporations Act.
- Allow companies or registered schemes, or a class of companies or registered schemes, to hold wholly virtual meetings (even where an entity or entities' constitution(s) do not expressly require/allow it) where ASIC considers that it would be unreasonable to expect them, due to circumstances beyond their control eg COVID, to hold a meeting a physical location.
A point to note is that if the government's proposed permanent changes (in the [exposure draft] Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments) to meeting requirements are legislated in their current form, companies will have the option to hold meetings in hybrid form, but will only be able to hold wholly virtual meetings where this is expressly permitted/required in their constitutions.
The supplementary explanatory memorandum observes that in practice ASIC's new emergency relief power will 'only be exercised by ASIC after the temporary relief provided by the Bill ends' as until then, 'all companies and registered schemes may hold wholly virtual meetings (even in the absence of ASIC exercising its emergency relief power)'.
- Grant relief on an individual or class basis, from requirements to give documents/a class of documents in hard copy and/or extend the timeframe for providing the document or class of documents where the regulator considers that may not be reasonable to expect compliance.
Importantly, relief granted by the regulator cannot be in place for more than 12 months after it commences.
The new powers are also permanent and will not sunset with Schedule 1 on 31 March 2022.
Schedule 2: Permanent (assuming certain requirements are met) relaxation of continuous disclosure requirements
Schedule 2 was amended in the Senate to include new requirements for:
- The Minister to commission an independent review of the operation of the amendments (in Schedule 2 only) within six months of the second anniversary of the commencement of Schedule 2
- The Minister to table the report of the review within 15 sitting days of receiving it
- The government making its response to the recommendations in the report publicly available within three months after the report is first tabled (at the latest)
If any or all of these requirements are not met within the required timeframes, then the changes to continuous disclosure laws introduced by Schedule 2 would 'sunset' (cease to operate). The effect of this would be that the changes would effectively be undone and the law would revert to its pre-TLA 1 state – it would be 'as if the amendments made by Parts 1, 2 and 4 of Schedule 2 to the amending Act had not been made'.
Timing
The amendments took effect from the day after the Bill received Assent.
