Australia: AGM countdown: what should company directors or officers have on their radar?

Many listed companies are approaching AGM season. This presents an opportunity to engage in a positive way with shareholders to move the business forward.

There are also a number of action items to juggle and requirements to meet. Both the Corporations Act 2001 (Cth) and ASX Listing Rules contain requirements for the conduct of AGMs and they can sometimes be tricky to navigate.

Whether you are a newly-appointed company secretary or director facing your first AGM, or a seasoned professional looking for a quick refresher, here is a high level countdown to assist with your preparations.

COUNTDOWN

10 - Have you announced your AGM?

A listed entity must announce the date of its AGM via ASX at least five business days before the closing date for receipt of nominations for the election of directors. An entity must normally accept those nominations up to 35 business days before the AGM.

It is important to understand the distinction between this brief announcement to the market and the Notice of Meeting (discussed in more detail in 4 below).

9 - Are you communicating with key stakeholders ahead of time?

Allow time to 'check in' with key shareholders and proxy advisers, particularly to sound them out on sensitive issues such as remuneration, issues of shares or options to directors and Board composition.

8 - Do you know what's on the agenda?

Consider all the possible items of business, so you allow time to draft explanatory notes and consult with ASX if necessary.

For example:

1. If there was a 'strike' against your remuneration report last year, you will need to comment on how you responded to any questions on remuneration from the last AGM, as well as allow for a spill resolution if there is a second strike this year
2. You may seek ratification of allotments of shares not previously approved by shareholders (to exclude them from the limit set out in Listing Rule 7.1, which provides that shares cannot be issued if the total issue over the year exceeds 15% of the entire capital)
3. You may require shareholder approval of proposed share or option issues to directors.

7 - How many Board vacancies are there?

The Board cannot set the number of directors below the maximum board size in the Constitution without member approval. For example, if the incumbent board is five directors but the Constitution allows for a maximum of ten directors, the Board will need an ordinary resolution to support the Board's recommendation to remain at five directors. This is relevant where shareholders have nominated director candidates in addition to the Board's nominees. As you will only know the result on the floor of the meeting, you will need to plan for the two scenarios – limiting the Board size or not.

6 - Do you need to revisit the NED remuneration pool?

An increase to the maximum aggregate remuneration of non-executive directors requires shareholder approval by ordinary resolution. The cap on the remuneration of the NED pool should be considered before the AGM, particularly if the Board is growing. The Remuneration Committee may wish to seek external validation of the new cap, and it may be a topic of conversation with key stakeholders.

5 - Does a 3-year approval cycle apply?

Some matters have a 3-year approval cycle. That is, they must be approved at every third AGM rather than every single year, so it's important to keep track of where the cycle stands. The matters that operate on this 3-year cycle are:

1. confirming that issues under an employee share, option or performance rights plan are an exception to the 15% limit set out in Listing Rule 7.1
2. renewal of a proportional takeovers provision if there is one in the Constitution.

Check whether the time has come around for either of these matters to be approved, and if so, ensure they are included in this year's Notice of Meeting.

4 - Have you issued your notice of meeting with enough lead time?

Members must be given at least 28 clear days' notice of the AGM. When determining the date to send your Notice of Meeting, your timetable needs to factor in time to consult with ASX (if relevant, discussed in 3 below) as well as printing and mailing time required by your share registry. Don't forget that Australia Post has changed its delivery times so you should check the deemed service provision in your Constitution. If you need to rely on ordinary post delivery times, this will need to be included in your timetable.

Remember to lodge a copy of the Notice of Meeting with ASX immediately at the time of despatch.

3 - Do you need to consult with ASX on your notice of meeting?

Where the AGM agenda includes particular Listing Rule approvals or changes to the Constitution, a draft Notice of Meeting must be submitted to ASX for review before it is despatched to members. ASX has up to five business days (commencing on the day after lodgement) to review the documents and confirm whether it has any objections, unless it requires more time to examine the documents.

2 - Are you prepared for a poll?

You may know in advance whether a poll is necessary or desirable at the AGM, for example where there are more director nominees than vacancies on the Board or where proxies show a strong 'no' trend on a particular issue.

Even if the Board has not planned to take a poll, it is prudent to be prepared. Have a poll procedure ready to go (covering logistics, the script for explaining the process to shareholders) and consider who will act as scrutineers (i.e. the company's auditors or the share registry).

If registration cards are to double up as the voting cards for a poll, make sure people keep their cards until completion of all items of business involving a poll. Consider grouping agenda items together where a poll is required.

1 - Are you ready to update ASX on the day?

A copy of the contents of any prepared announcement that will be delivered at an AGM must be given to ASX no later than the start of the AGM. If you are holding your meeting in external premises, ensure that you have internet access in order to connect to the ASX platform.

BLAST OFF!

Careful planning and time management are critical to a successful AGM. By considering all the steps above and taking appropriate action at the right time, you will have laid the groundwork for an AGM without surprises. Finally, remember to report the votes on all items of business to ASX immediately after the AGM has wrapped.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories