During the early stages of the COVID-19 pandemic, the temporary power in section 1362A of the Corporations Act 2001 (Cth) (Corporations Act or the Act) was introduced for an initial period of six months and was used to make temporary modifications to the Corporations Act to allow virtual meetings to be held. The Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Cth) and the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Cth) (Determination No 3) have followed modifying the operation of the Corporations Act to, among other things, expressly allow companies to hold meetings virtually. The Determination No 3 has expired on 21 March 2021.
The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (the Bill) that was publicised and widely expected to effectively extend the provisions relating to holding virtual meetings (among other things) until 16 September 2021 has not been passed. Instead, after the Second Reading, it has been referred to the Senate Economics References Committee with the Committee’s report due on 30 June 2021. It is now not until August 2021 that the Bill could possibly be considered again.
Amid a mild media storm1, ASIC has issued a media release stating on 23 March 2021 that it will:
shortly adopt a temporary ‘no action’ position in relation to the convening and holding of virtual meetings. … In order to provide the market with a degree of certainty, ASIC’s ‘no action’ position will:
- support the holding of meetings using appropriate technology;
- facilitate electronic dispatch of notices of meeting including supplementary notices; and
- allow public companies an additional two months to hold their AGMs.2
On 29 March 2021, ASIC has issued 21-061MR reiterating that ASIC adopts ‘no-action’ position and re-issues ASIC guidelines for investor meetings using virtual technology3, noting that:
The position relating to the convening and holding of meetings using virtual technology applies to meetings held between 21 March 2021 and the earlier of:
- 31 October 2021; and
- The date that any measures are passed by the Parliament relating to the use of virtual technology in meetings of companies or managed investment schemes.4
While this goes some way to addressing the uncertainty created by the unexpected legislative hiatus, one may wonder why is it that we need to rely on the temporary relief measures at all. Don’t we have section 249S of the Corporations Act, promisingly entitled Technology, that states:
A company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.
This is not a replaceable rule under section 135 of the Corporations Act and constitutions of multiple public and private companies often have similarly worded rules.
In relation to the directors’ meetings, section 248D of the Corporations Act, entitled Use of Technology, provides that:
A directors’ meeting may be called or held using any technology consented to by all the directors. The consent may be a standing one. A director may only withdraw their consent within a reasonable period before the meeting.
It would appear from the fact that additional legislation was specifically passed to allow virtual meetings to be held that the existing provisions in the Corporations Act were deemed either prohibitive of such meetings or insufficiently clear. To this end, the Explanatory Statement for the Bill (2021 EM) contains the following statement: ‘there are constraints on companies’ ability to conduct meetings using alternative technologies’.5 On pages 8-9 of the same document it is stated (emphasis added):
- Meetings must be held at a physical location. While technology can be used to connect people at one or more other locations, wholly virtual meetings are not permitted;
- Documents relating to a meeting must be posted unless the member has agreed to the document being sent via email or fax and the specific requirements in the Corporations Act are met. Some documents may only be provided via post;
- Documents relating to a meeting must generally be signed in hard copy; and
- In general, minutes [of the meeting] must be kept in hard copy.
It is not clear from the Explanatory Memorandum to the Company Law Review Bill 1997 (1997 EM) introducing s249S of the Act and the relevant case law6 why the position was taken by the government that wholly virtual meetings are not permitted.
In 2004, a leading academic in this area, Professor Boros, stated in her article:
In Australia, there is no express provision allowing a meeting to be held in no place, although the legislation does expressly provide for a meeting to be held in more than one place. Depending on how this requirement is interpreted, it might be possible to argue that this could extend to an entirely virtual meeting.7
It appears that the issue of interpretation of whether a virtual meeting takes place at more than one venue or at ‘no place’ may be at the heart of the uncertainty.
As such, notwithstanding what appears to be a positive trend in case law towards accepting virtual meetings, the latest ASIC media release still expresses doubt in respect of legal status virtual meetings (albeit affirming the permissibility of hybrid meetings) (emphasis added):
ASIC considers that hybrid meetings are permitted under the Corporations Act but entities need to check whether their constitution restricts meetings being held in this way.
There is some doubt as to whether the Corporations Act, in the absence of the amendments made by the Determinations, permits virtual AGMs and there may also be doubt as to the validity of resolutions passed at a virtual AGM. Entities should also consider whether they can hold a virtual meeting under their constitution.
Entities that are concerned about the validity of virtual meetings may wish to seek legal advice on section 1322 of the Corporations Act. Various irregularities associated with meetings held for the purposes of the Act are not invalidated unless the Court makes a contrary declaration. A person may be also able to apply to the Court for an order addressing other irregularities.8
For now, at least during the period specified by ASIC, it would appear that the companies with constitutions which are not prohibitive of meetings conducted using technology are safe to proceed with virtual meetings, provided that the ASIC guidelines for investor meetings using virtual technology are followed.
This article was written by Thomas Kim, Partner, Marianna Parry, Special Counsel, with legal research assistance from Will Marshall, Solicitor.
1 Tom Burton and John Kehoe, ASIC turns blind eye to virtual AGMs (23 March 2021) https://www.afr.com/politics/federal/asic-to-take-no-action-against-virtual-agms-20210323-p57dbk; Tom Minear, Government blunder leaves businesses in the lurch (23 March 2021). https://www.heraldsun.com.au/news/victoria/government-blunder-leaves-businesses-in-the-lurch-left-in-lurch/news-story/69ca05e851a24db0daac51eb3c4528d2?btr=0db35c45c363b73cf82883208fa676ba.
2 ASIC, 21-056MR ASIC to adopt ‘no-action’ position for AGMs (23 March 2021) https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-056mr-asic-to-adopt-no-action-position-for-agms/.
3 https://asic.gov.au/about-asic/news-centre/news-items/asic-guidelines-for-investor-meetings-using-virtual-technology/.
4 https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-061mr-asic-adopts-no-action-position-and-re-issues-guidelines-for-virtual-meetings/.
5 Explanatory Memorandum (Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP) Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, page 7, para [1.2].
6 Re Farnell Electronic Components Pty Ltd (1997) 25 ACSR 345, page 347 at [20] citing Wagner v International Health Promotions (1994) ACSR 419 and Re Ferguson (1995) 58 FCR 106; Alstom Signalling Solutions Pty Ltd v Alstom Transport Australia Pty Ltd [2016] FCA 838; TPG Telecom Ltd [2020] NSWSC 772; In the matter of Ellerston Global Investments Ltd [2020] NSWSC 879; Re Avita Medical Ltd [2020] FCA 592; Sienna Cancer Diagnostics Ltd [2020] FCA 899.
7 Boros, Elizabeth, “Virtual Shareholder Meetings: Who Decides How Companies Make Decisions?” (2004) 28(2) Melbourne University Law Review 265 accessed at https://classic.austlii.edu.au/au/journals/MelbULawRw/2004/9.html#fn60.
8 https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-061mr-asic-adopts-no-action-position-and-re-issues-guidelines-for-virtual-meetings/.
