A Guide to Holding General Meetings in a COVID-19 World

COVID-19 has thrown 2020 into chaos. Various nations worldwide are in the midst of partial or full country-wide shutdowns of all non-essential businesses and services. Wall Street trading has recently been halted for the fourth time in 2 weeks as the pandemic wreaks havoc on global financial markets. Governments globally are implementing measures to close borders, restrict gatherings, enforce “social distancing” and stimulate faltering economies in response to COVID-19.

On 18 March 2020 the Australian Federal Government announced a ban on non-essential indoor gatherings of 100 or more people (company shareholder meetings not being defined as essential).

The difficulties presented by COVID-19 do not change or alter a listed entity’s obligations to adhere to any requirements imposed upon it by the Corporations Act 2001 (Cth) (“Act”), the ASX Listing Rules (“Listing Rules”) and/or the company’s constitution. Until such time as ASIC delivers a directive permitting shareholder meetings to be held completely “virtually” and without a physical location for the meeting (the legal position on which remains unsettled), we consider that there are various measures that listed entities can take to reduce the risks posed by COVID-19 associated with holding shareholder meetings.

A listed entity likely has shareholders from a broad range of society, both domestic and international, and holding a general meeting of shareholders by way of usual best practice given the current recommended health advice could be problematic.

Set out below are some tips on the processes and procedures listed entities can employ to minimise health risks in calling and holding a general meeting in the current climate together with a brief summary of the legal requirements for doing so.

Calling and holding a meeting in COVID-19 times

Some tips that listed entities can employ to hold a general meeting in the current climate are:

  1. Make the meeting accessible to shareholders electronically (e.g. by webinar, livestream or similar). There are various appropriate and affordable platforms on the market suitable for livestreaming or broadcasting general meetings and advice can also be sought from an entity’s share registry to facilitate electronic meetings. Section 249S of the Act permits an entity to hold a meeting of members “at two or more venues simultaneously using any technology that gives the members as a whole a reasonable opportunity to participate”.
  2. Include commentary in the relevant notice of meeting and/or a covering announcement to accompany the release of the notice of meeting strongly encouraging shareholders to:
  • (i) attend the meeting electronically, rather than physically, given the health risks;
  • (ii) engage in either proxy or direct voting*, where available; and
  • (iii) contact the company directly if they intend to attend in person so appropriate arrangements can be put in place with respect to social distancing and to confirm that they are not in any of the “at risk” categories for COVID-19 (e.g. recent international travel or close contact with a confirmed case).
  1. Ensure that the live stream or broadcast of the meeting to shareholders permits shareholder participation (such as the ability to ask questions of the Board), the function of which could be managed by an online moderator or similar. It is important that shareholders are afforded a reasonable opportunity to participate in the meeting as required by section 249S of the Act.

What are the legal requirements for calling and holding a general meeting?

Where usual procedures set out in the Act and the Listing Rules must be followed in calling and holding a general meeting of members. For a listed entity, these include ensuring that the relevant notice of meeting complies with the Listing Rules and the entity’s constitution, as well as ensuring that:

  • (i) members are provided with 28 days’ notice of the meeting (section 249HA of the Act);
  • (ii) the notice of meeting specifies a place, date and time that the meeting will be held (section 249L(1) of the Act) (companies may also want to consider holding the meeting at a number of venues accommodating smaller groups, linked via video link);
  • (iii) the meeting is held at a reasonable time and place (section 249R of the Act);
  • (iv) a quorum of members is present for the meeting to proceed (most listed company constitutions in Australia will count members voting by proxy as being “present” for the purposes of achieving a quorum);
  • (v) members are given the right to participate in proceedings at the meeting. A meeting can be invalidated under section 1322 of the Act for a company failing to do so; and
  • (vi) all Listing Rule resolutions are decided by poll (section 10 of the new Guidance Note 35).

For the avoidance of doubt, an entity’s constitution will usually permit deferral of a meeting of members that has been called, for a certain period of time. Further, the Act permits an entity to defer the date of their annual general meeting (AGM) beyond the date mandated in the Act subject to the company having received prior approval from ASIC. Should you require any assistance in determining the rights of deferral afforded to your company, or in making an application to ASIC for deferral of your AGM, please don’t hesitate to contact us.

What if some shareholders still want to physically attend the meeting?

We are cognisant that some shareholders may still want to physically attend a general meeting and may not be amenable to attending the general meeting electronically, which is a risk that likely cannot be completely avoided. By taking the above steps (particularly step 2(iii)) we consider listed companies can mitigate this risk and the recent ban in Australia of non-essential indoor gatherings of 100 or more people may also assist larger listed entities in managing this risk.

For more information on your obligations in calling and/or holding a general meeting, or on how COVID-19 might otherwise affect your current business practices, please don’t hesitate to contact Alfonso Grillo of GrilloHiggins.

– 20 March 2019

UPDATE: Since the time of publication of this article, ASIC has issued media release 20-068MR – “Guidelines for meeting upcoming AGM and financial reporting requirements” (Media Release). The guidance provided in the Media Release states:

  1. ASIC is aware that COVID-19 may temporarily impact on companies’ ability to hold AGMs and cautions against holding an AGM whilst there are restrictions on large gatherings unless the entity can provide members as a whole with a reasonable opportunity to participate in the meeting.
  2. ASIC notes that COVID-19 will have a particular impact on listed and unlisted public companies with 31 December balance dates that are required to hold an AGM by 31 May 2020 (Affected Entities).
  3. In summary, ASIC will not take any action under section 250N(2) of the Act if Affected Entities postpone their AGM for 2 months until the end of July 2020, or such later date that ASIC advises, and supports Affected Entities holdings AGMs using appropriate technology.
  4. Where an Affected Entity remains committed to holding its AGM by 31 May 2020:
  • (i) where a meeting has already been called, ASIC supports companies sending supplementary instructions to members electronically, by posting on their website or via market announcement to encourage proxy voting and electronic participation;
  • (ii) entities should be guided by their constitution when deciding to hold a “hybrid” or “virtual” AGM though the ability to hold a “virtual” AGM remains unclear in the Act. ASIC recommends that entities seek legal advice about the validity of holding “virtual” meetings;
  • (iii) ASIC otherwise intends to take a “no action” position on non-compliance with the Act that may restrict the holding of “virtual” AGMs by Affected Entities, conditional upon the entity complying with section 249S of the Act including providing members with the opportunity to ask questions of the auditor and company management and voting occurring via poll; and
  • (iv) ASIC also intends to take a “no action” position on any contravention of the Act by Affected Entities in dispatching updated instructions to members for online participation in an AGM, provided that the instructions are dispatched at least 2 business days prior to the date of the AGM.
  1. Financial reporting obligations appear at this stage to be unaffected, however ASIC is continually reviewing its position.

It is important to note that guidance in the Media Release only covers Affected Entities in respect of AGMs which are to be held by 31 May 2020 – we recommend any other entities seek legal advice on holding a general meeting in the near future.

The full Media Release can be found at https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-068mr-guidelines-for-meeting-upcoming-agm-and-financial-reporting-requirements/.

*The current position expressed by ASX and the Governance Institute of Australia is that an entity’s constitution must expressly permit direct voting for it to be offered as a means of voting at a general meeting.

 

           

Tom Sapountsis