With the annual general meeting (AGM) season on our doorsteps, we would like to remind listed companies with a 30 June year end of the requirement to hold their AGM by 30 November 2020 (or 31 January 2021 – see the Delayed meeting paragraph below) and to outline some of the considerations that should be taken into account in preparing the notice of AGM.
Timing for annual general meetings
Delayed meeting
Usually, a listed company’s notice of AGM, accompanying explanatory memorandum and proxy form (Meeting Materials) need to be prepared, printed and sent to shareholders with sufficient time to hold the AGM by no later than 5 months after their financial year end (ie by Monday, 30 November 2020 for companies with a 30 June year end).
However, ASIC has adopted a “no action” position in relation to entities who fail to hold their AGM within 5 months after their financial year end for COVID-19 related reasons, provided they hold their AGM within 7 months of their financial year end (ie by Sunday, 31 January 2021). ASIC introduced this position for those companies that may find it difficult to hold their AGM within the required time period due to restrictions on gatherings, travel restrictions and to allow more time for those entities that may also be relying upon an extension of time for lodging their financial reports.
Process
A summary of the process, order and timing for convening the AGM for listed companies is below. This timing may be longer or shorter depending on the number and type of resolutions to be approved and whether ASX and/or ASIC approval is required:
| Stage | Process | Timing |
|---|---|---|
| 1 | Preparation of Meeting Materials | ~1 week |
| 2 | Lodgement of Meeting Materials with ASX (if required) | Up to 5 business days* |
| 3 | Lodgement of final Meeting Materials with ASIC (if required)** | Up to 14 days, subject to any abridgement |
| 4 | Printing and dispatching Meeting Materials (see the Providing electronic Meeting Materials paragraph below) | Generally 2 - 3 days*** |
| 5 | Time and date for determining eligibility to vote at the AGM | Not more than 48 hours before commencement of the AGM |
| 6 | Cut-off date for receipt of proxy forms | Not less than 48 hours before commencement of the AGM |
| 7 | Announcement of any prepared announcement, including any prepared address by the chairperson, that will be delivered at the AGM | No later than the start of the AGM |
* Draft notices of general meeting that contain resolutions for Listing Rules purposes must be submitted to ASX for review before they are sent to shareholders. ASX may take 5 business days to advise whether it objects to a draft document and may extend that deadline if it needs further time to review the document. ASX has requested that listed entities bear these timing requirements in mind and allow sufficient time when they submit their draft notices of meeting for ASX to review. This is particularly important if there are a number of resolutions or complex transactions to be considered. If waivers from any Listing Rules are required in connection with the notice of AGM, additional time should be allowed to obtain the waiver as the 5 business day period referred to above does not include the time needed to obtain a waiver.
** The Corporations Act requires final and signed Meeting Materials to be lodged with ASIC, not draft documents.
*** Depending on the company’s constitution, the Meeting Materials will be deemed to be received by shareholders within a specified period of time after they are sent.
***** ASX has prepared a pro forma notification that entities can use to announce meting results. An editable version in both Word and Excel format can be downloaded from the ASX website here.
If you haven’t already, we recommend you start preparing your Meeting Materials now, with the aim of having a final draft by the end of September at the latest.
Providing electronic Meeting Materials
Previously, companies were required to send written Meeting Materials individually to each shareholder, unless the shareholder had nominated an electronic means for the Meeting Materials to be provided. Temporary modifications to the Corporations Act now permit companies to send the Meeting Materials by using “one or more technologies”, effectively allowing a company to:
- Send Meeting Materials by email to any member that the company has an email recorded for; and
- For those members that haven’t provided email addresses, the company can now send a letter setting out a URL for viewing or downloading the Meeting Materials.
Virtual meetings
Provided its constitution permits it to do so, a company may now hold its AGM either as a ‘hybrid’ meeting (ie both physically and virtually) or completely virtually.
Historically there have been doubts about whether virtual meetings are properly constituted under the Corporations Act, however ASIC has adopted a “no action” position and the Treasurer has made temporary modifications to the Act to allow hybrid and virtual meetings.
Companies should note that shareholders must be given the same opportunity to participate in the meeting (ie vote and ask questions) as though they were physically present.
ASIC review – financial benefits to related parties
If a company requires shareholder approval to give financial benefits to related parties, final (not draft) Meeting Materials should be provided to ASIC as soon as possible after the receipt of confirmation that ASX has no objections to the Meeting Materials.
ASIC’s fee for reviewing Meeting Materials seeking approval to give a financial benefit to a related party (ie approvals under Chapter 2E of the Corporations Act) is $802, and the application fee for an abridgement of the 14 day review period (to approx. 7 days) is $130.
Meeting Materials may now be submitted to ASIC via an online ASIC Regulatory Portal, which enables applicants to track the status of their applications and provides online payment options.
ASX Listing Rule changes
On 1 December 2019, the most comprehensive changes in a decade to the ASX Listing Rules (Listing Rules) came into effect. We summarised the key changes in our Market Insights article “Changes to the ASX Listing Rules” on 29 November 2019 (click here).
Companies will now be familiar with many of the introduced changes, but should be aware of the following when preparing their Meeting Materials and holding their AGMs:
- Updates have been made to the disclosure requirements for shareholder resolutions to:
- approve or ratify issues of securities (or agreements to issue securities) under Listing Rules 7.1, 7.1A and 7.4;
- approve or ratify issues of securities to directors and persons in a position of influence under Chapter 10; and
- approve or renew employee incentive schemes;
- Changes have been made to the voting exclusion statements for resolutions which seek shareholder approval under certain Listing Rules;
- All Listing Rule resolutions (and preferably, all resolutions) must be decided by a poll rather than by a show of hands; and
- The outcome of each AGM resolution needs to be notified to ASX in the particular format outlined in Listing Rule 3.13.2.
If a company seeks shareholder approval under a Listing Rule at the AGM, the company is now required to summarise the relevant rule and what will happen if shareholders give, or do not give, that approval.
These changes mean that companies won’t be able to rely on simply replicating the language used in previous Meeting Materials and announcements, but will need to specifically contemplate the changes made to the Listing Rules and their effect on the Meeting Materials.
Please contact us should you wish to discuss these changes.
Resolutions to consider for annual general meetings
We have set out below a number of common resolutions which you may wish to consider for this year’s AGM:
Director Resolutions
(a) Re-election of directors
Consider whether any directors appointed to fill a casual vacancy are required to be elected by shareholders and which directors are required to be re-elected by rotation. Generally, and with the exception of the managing director, a third of the directors must stand for re-election, with directors not holding office (without re-election) past the third AGM after their appointment.
(b) Increase non-executive director fee pool
Consider the current maximum total aggregate amount of fees payable to non-executive directors and whether this amount needs to be increased – if it does, shareholder approval will be required under Listing Rule 10.17.
(c) Issue securities to directors
Consider whether any securities are to be issued to directors under Listing Rule 10.11 (general issues to related parties) or Listing Rule 10.14 (issues under an employee incentive scheme such as share option plan (ESOP) or performance rights plans (PRP)), and whether the company will seek shareholder approval under section 208 of the Corporations Act or rely on an exception (eg arm’s length terms or reasonable remuneration). Please note that if the company intends to issue securities to directors in lieu of cash director fees, an ASX waiver may be required. It is also important to consider whether approval may also be required pursuant to sections 200B of the Corporations Act in relation to benefits which may be given in the future in connection with the director’s retirement from office, such as the accelerated vesting of incentive securities.
Securities Resolutions
(a) Ratify previous security issues
Consider seeking shareholder approval to ratify any securities issued during the previous year without shareholder approval. Shareholder approval will “refresh” the company’s placement capacity under Listing Rule 7.1 by allowing the company to issue up to its full 15% placement capacity during the 12 months from the date of the AGM. Ratification can also be sought for issues made under the expanded 10% placement capacity under Listing Rule 7.1A.
(b) Approve 10% placement facility
Companies which have a market capitalisation of $300 million or less and are not included in the S&P/ASX300 Index can seek shareholder approval to issue an additional 10% of their issued capital over a 12 month period pursuant to Listing Rule 7.1A. This approval must be sought at each AGM for issues for the following year. Details of all securities issued since last approval must be included, even if they have already been ratified or were issued with shareholder approval.
(c) Approve upcoming capital raisings
Consider seeking shareholder approval under Listing Rule 7.1 for any capital raisings likely to occur in the 3 months following the AGM so as not to use up the company’s 15% placement capacity under Listing Rule 7.1 or 10% placement capacity under Listing Rule 7.1A (if applicable).
We remind entities of this option particularly in light of the upcoming expiry of the ASX class waiver relief which temporarily increased the placement capacity limit under ASX Listing 7.1 from 15% to 25%. The class waiver relief applies to capital raisings announced on and before 30 November 2020.
We summarised the class waiver relief in our Market Insights article “ASX extends class waivers to 30 November 2020” on 21 July 2020 (click here).
(d) Approve/renew employee incentive schemes
Employee incentive schemes such as an ESOP or PRP must be refreshed every 3 years in order for issues made under those schemes not to be counted towards the company’s 15% placement capacity under Listing Rule 7.1. Companies are now required to specify the maximum number of securities proposed to be issued under the relevant scheme over the 3 years following approval.
It is also important to consider whether approval ought to be sought under section 200B of the Corporations Act, to ensure that any accelerated vesting of performance securities does not result in a termination benefit prohibited by the Corporations Act.
(e) Consolidate securities
Consider the company’s capital structure and whether it is appropriate to undertake a share consolidation.
Other Resolutions
(a) Two strikes resolution
Consider whether a specific resolution is required for a “two strikes” resolution – this will be necessary if more than 25% of the eligible votes cast were against the remuneration report at last year’s AGM.
(b) Proportional takeovers resolution
If there is a provision in the company’s constitution regarding proportional takeovers, this must be renewed every 3 years by special resolution (ie 75% majority of votes cast). A proportional takeovers provision allows a company to refuse to register a transfer in relation to a proportional takeover bid (i.e. a bid where the bidder seeks a certain percentage of each shareholder’s parcel) until such time as the bid is considered by shareholders.
(c) New constitution
Consider how old the company’s current constitution is and whether to replace it with an up-to-date constitution incorporating changes to the Corporations Act and Listing Rules (eg restricted securities provisions, dividend payments, fees for registration of off-market transfers, and minimum shareholdings).
Please contact us if you have any queries in relation to AGM requirements or if you would like any assistance drafting or reviewing your company’s Meeting Materials for this year’s AGM.
This article was written by Deanna Carpenter, Partner and Maddison Cramer, Associate.