Last year, temporary COVID-19 amendments to the Corporations Act 2001 (Cth) (Act) were introduced permitting:
- the use of technology to hold meetings, including Annual General Meetings (AGMs)
- electronic and split execution of documents by company officers.
These reforms were designed to provide regulatory relief and flexibility to companies now forced to operate in a socially-distanced world (which we wrote about here). As the pandemic rolled on, the relief - which was initially scheduled to expire in November 2020 - was extended to 21 March 2021 (as we discussed here).
Treasurer Josh Frydenberg has now announced the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Cth) (Bill) which seeks to extend this relief for a further six months to 16 September 2021, but with some changes. Companies should monitor these developments and ensure they're up to date with the changes.
Relief extended (again)
If passed, the Bill will extend and expand upon the relief currently provided under the Corporations (Coronavirus Economic Response Determination (No 3) 2020 (Cth). This time around, the amendments provide greater detail about electronic execution and virtual meetings and make clear that these 'new' rules will apply as mandatory rules rather than replaceable rules, meaning they cannot be displaced by a company's constitution.
Key features of the temporary amendments, as compared to the existing law, are:
- execution: Company documents may be executed using electronic means, whereas previously, all executing persons were required to sign physical copies. It remains critical to electronic signing that the following three conditions are met:
- the copy includes the entire contents of the document
- a method must be used to identify the person and indicate their intention to sign the document (e.g. using DocuSign)
- that method must be reliable and appropriate for the purposes for which the document was generated or proven in fact to have indicated the person's identity and intention.
- meetings: Meetings of directors, shareholders and others may be held using electronic means (whereas previously, meetings were to be held in a physical location and while technology could be used to assist, wholly virtual meetings were not permitted). Companies must also ensure virtual meetings are held in a manner that gives members, as a whole, a reasonable opportunity to participate
- notice of meetings: Notices may be given and signed electronically, although members may opt-in for hard copies if they prefer. Previously, hard copy notices were required unless a member had agreed otherwise
- minutes: Minutes may be taken and kept electronically, whereas previously, hard copies were required.
For company secretaries and officers trying to come to grips with the proposed changes, the Explanatory Memorandum to the Bill is highly instructive and provides practical examples that will be useful. For example, it provides clarity that while a counterpart must include the entire contents of the document, this does not mean the person signing needs to physically print and sign every page, provided the counterparts are identical. Similarly, it confirms that a single member suffering technical difficulties will not invalidate the meeting and that voting at virtual member meetings must be conducted by poll.
The Bill also introduces a fault element to existing continuous disclosure laws, these changes are considered in our article here.
Permanent change on the horizon for e-signing
The federal government has confirmed that the electronic execution reforms (and the ability to send meeting-related materials electronically) will be made permanent before the temporary arrangements expire on 16 September 2021. This is a change that will be warmly welcomed by corporate and legal fraternities across Australia, and follows consultation on an exposure draft that was released last year for stakeholder consultation (as we discussed here).
The fate of virtual AGMs
The treatment of virtual AGMs from 16 September 2021 is less clear, with Treasurer Frydenberg advising that after the extended relief expires, "member meetings will need to be conducted consistent with pre-COVID-19 laws which require an-in person meeting to be held". Rather than making these changes permanent, a 12-month opt-in pilot will be conducted for companies to hold hybrid AGMs (in which shareholders can choose whether to attend meetings in person or virtually) and facilitate a "proper assessment of the shareholder benefits of virtual meetings". The pilot will commence once the temporary arrangements expire.
For many, this will be considered a backward step, but the approach could still change. The Senate Select Committee on Financial Technology and Regulatory Technology (which we discussed here) is due to release its final report on these issues on 16 April 2021 and its findings could influence the decision to defer making these changes permanent. This is certainly a space to watch.
Until then, companies should keep a weather eye on the progress of the Bill and ensure they are prepared for the changes if and when they are passed in the coming weeks.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.