COVID-19 has made life as we know it challenging in many respects and companies are seeking some certainty at a time of great uncertainty. In rising to the challenge at this time, new ways of meeting obligations are being established.
On 4 May 2020, the Federal Government registered the Corporations (Coronavirus Economic Response) Determination (No.1) 2020 (Determination), which has effect from 6 May 2020 until its repeal on 6 November 2020. This is designed to give certainty to companies, responsible entities, external administrators and other classes of persons about how they can meet their legal obligations for the next six months by enabling alternative remote and electronic methods for businesses to execute documents and to hold meetings such as an Annual General Meeting (AGM).
Following this Determination, ASIC has also issued ‘Guidelines for investor meetings using virtual technology’. It is worth noting that the Guidelines mention that ‘hybrid and virtual meetings’ held by companies are in fact being observed by ASIC and companies are at risk of breaching the Corporations Act 2001 (Cth) if the new rules are not properly adhered to. So, it is worthwhile for companies and responsible entities to review their compliance with the Determination and Guideline.
Holding a virtual meeting – what should you do?
Under the Determination, entities that are required or permitted to hold a meeting (for example AGM’s or creditors’ meetings) may do so using technology such as Zoom, enabling participation without physical attendance. This ensures that any virtual meetings are conducted in a way to ‘preserve and promote genuine and effective interaction between members and the board or responsible entity’.
The Determination and Guidelines provide that technology can be used to facilitate the following:
|Quorum||Achieving a quorum with a person participating electronically being deemed present.|
|Participation||In the case of a shareholder meeting, enabling members to participate by being given an opportunity to ask questions live and comment during the course of the meeting in response to presentations, debate and other matters raised during the meeting.
In the case of an AGM, enabling an opportunity for questions or comments on the management of the company and where applicable the remuneration report as well as questions to the auditor (see sections 250S, 250SA and 250T of the Corporations Act).
|Voting||Registration of a vote by allowing votes to be undertaken by a poll (not a show of hands such as to disenfranchise members) which can be done in real time and if practical in advance.
Members should have the opportunity to consider responses to questions and debate before voting on resolutions put at a meeting to assist them in making fully informed decisions.
It is important to have regard to your own company’s constitution to determine where technology can be appropriately used to facilitate such decisions.
Giving Notice – when and what should be included?
Section 5 of the Determination modifies the requirement for a notice of a meeting to be sent in writing and instead allows for it to be sent via technological means. The example given in the Determination is use of an email attaching a notice of a meeting and other material relating to the meeting or providing a link where such material can be viewed or downloaded, such as through Dropbox. Those without an email can be sent the URL via a letter or postcard where they can view or download the other material.
Three key aspects for notice are:
- it must include clear, concise and effective information about how those entitled to attend can participate in the meeting, including how to use technology to observe, vote, make comments and ask questions (the ‘Information’) (section 249L(3) of the Corporations Act);
- where notice has already been given before the commencement of the Determination, then fresh notice must be given at least 7 days before the scheduled meeting date that includes the Information; and,
- where a proxy is used, the company or responsible entity should specify an email address (or other online submission facility) for the service of proxy appointments and the chairman of the meeting must treat such person in the same way as if that person was attending in person.
Running into technological strife
We all grapple with technology issues from time to time. To ensure these do not occur during that all-important Board meeting, ASIC provides the following practical guidance:
- test run your technologies and ensure that your chosen technology can facilitate the anticipated meeting and participation;
- consider a Plan B in the event things don’t go to plan determine how you will communicate a change of plans in real-time to members virtually, and early on; and,
- adjourning if technical issues subsist and members are unable to participate reasonably then consider adjourning the meeting.
Execution of company documents
The Determination alters the operation of section 127 of the Act to give certainty to directors of companies, company secretaries and any other persons dealing with companies that when company officers sign a document electronically (including an electronic document), the document has been validly executed.
The Determination provides that a document may be executed without common seal where the required signatory or signatories either:
- sign a copy or counterpart of the document in physical form; or,
- use electronic communication* which reliably identifies the person and indicates the person’s intention about the contents of the document.
*(‘electronic communication’ is defined in the Electronic Transactions Act 1999 and covers communication of information in the form of data, text or images by means of guided/or unguided electromagnetic energy. It also interestingly, covers electronic audio communication).
In both cases the document must include the entire contents of the document but does not need to include the signatures of the other counterparties. That is, the signatories do not need to sign the same physical document and so there is no requirement for a ‘single static document’ to satisfy section 127.
The Explanatory Statement provides some practical examples of the ways in which officers might sign a document electronically which include:
- pasting a copy of a signature into a document;
- signing a PDF on a tablet, smartphone or laptop using a stylus or finger; or,
- cloud-based signature platforms like DocuSign.
If the above is satisfied, then a person may assume that a document has been duly executed by the company in accordance with section 127(1).
If you have any queries regarding the new rules or how they apply to you and your company, feel free to get in touch with a lawyer in Coleman Greig’s Commercial Advice Team, who would be more than happy to assist you today.