ASIC position on holding AGMs during COVID-19
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Australia’s corporate regulator, ASIC, will not enforce the time period in which AGMs are required to be held and has provided guidance on technological resources to assist companies in dealing with COVID-19 restrictions.
Unless registered as charities by the Australian Charities and Not-for-Profits Commission (ACNC), a Public Company is required to hold an AGM within five months after the end of its financial year. The current restrictions on movement, gatherings and travel are particularly relevant for companies that have December 31 balance dates and therefore are required to hold their AGM by May 31.
To support these and other companies, ASIC will take no action if a company postpones their AGM for up to two months and ASIC will support companies to hold their AGMs by using appropriate technology.
two month “no-action” position
Companies that would ordinarily be required to hold their AGM by the end of May will now have until July 31. Although ASIC is unable to vary the requirement under the Corporations Act 2001 (the Act), the regulatory body has stated that it will not take action against any company that holds their AGM during the two-month extension period.
The situation is being monitored and further extensions may be granted if necessary.
hybrid or virtual AGMs
A hybrid AGM consists of a physical location supplemented by online facilities, whereas a virtual AGM is conducted solely online. The use of hybrid AGMs are permitted under the Act. However, there are doubts as to whether virtual AGMs are allowed. To ensure companies can continue to hold AGMs, ASIC has taken a “no-action” position on virtual AGMs.
ASIC will not take any action against a company for non-compliance with any provision of the Act that restricts the implementation of a virtual AGM.
The chosen technology must still allow members as a whole a reasonable opportunity to participate as required by s 249S of the Act. ASIC has clarified this requirement to include that members are able to ask questions of the auditor and about management, and that voting should occur by a poll rather than a show of hands. If a company’s technology is unable to facilitate these requirements, it would be preferable to postpone the AGM by utilising the two month extension.
However, a company may not be able to hold a hybrid or virtual AGM if the use of such technology is restricted by the company’s constitution. ASIC does not have the power to override a company’s constitution in these circumstances. It is imperative that the company’s constitution is reviewed to ensure a hybrid or virtual AGM is permissible. This must be done on a case by case basis.
supplementary electronic notices
If an AGM is scheduled within the period up until 31 May, companies are able to provide supplementary instructions for online participation. The instructions must be made available to members by sending an email to all members that have provided the relevant details, posting a notice on the entity’s website and providing a market announcement if the entity is listed on a market. The instructions must be provided at least two business days before the meeting is held.
When navigating the new guidelines for holding an AGM during COVID-19, the most important document is the company constitution. If you would like assistance in interpreting your constitution’s position on hybrid or virtual AGMs, or any other of the ASIC guidelines, please do not hesitate to contact our team.
AGMs and other meetings of registered charities
Chapter 2G of the Act (which regulates the timing and conduct of AGMs of public companies) does not apply to companies registered as charities by the ACNC. Those companies are subject to the ACNC’s Governance Standard 2, which (to a lesser degree of prescriptiveness) requires a charity to be ‘accountable to members’.
Holding an AGM (or other meeting) is the most common way a charity meets this accountability requirement – however it is not the only option and is thus not always common practice. As with broader public companies though, charities should have regard to specific requirements (or limitations on the use of technology) in their governing document (which may include an annual meeting by a prescribed date), which notwithstanding the relaxed approaches by the ACNC and ASIC on regulatory requirements, will still generally be enforceable by members and other stakeholders of the charity.
Like ASIC, the ACNC has released some useful guidance to support charities through the practical challenges caused by COVID-19.
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ASIC position on holding AGMs during COVID-19
Australia’s corporate regulator, ASIC, will not enforce the time period in which AGMs are required to be held and has provided guidance on technological resources to assist companies in dealing with COVID-19 restrictions.
Unless registered as charities by the Australian Charities and Not-for-Profits Commission (ACNC), a Public Company is required to hold an AGM within five months after the end of its financial year. The current restrictions on movement, gatherings and travel are particularly relevant for companies that have December 31 balance dates and therefore are required to hold their AGM by May 31.
To support these and other companies, ASIC will take no action if a company postpones their AGM for up to two months and ASIC will support companies to hold their AGMs by using appropriate technology.
two month “no-action” position
Companies that would ordinarily be required to hold their AGM by the end of May will now have until July 31. Although ASIC is unable to vary the requirement under the Corporations Act 2001 (the Act), the regulatory body has stated that it will not take action against any company that holds their AGM during the two-month extension period.
The situation is being monitored and further extensions may be granted if necessary.
hybrid or virtual AGMs
A hybrid AGM consists of a physical location supplemented by online facilities, whereas a virtual AGM is conducted solely online. The use of hybrid AGMs are permitted under the Act. However, there are doubts as to whether virtual AGMs are allowed. To ensure companies can continue to hold AGMs, ASIC has taken a “no-action” position on virtual AGMs.
ASIC will not take any action against a company for non-compliance with any provision of the Act that restricts the implementation of a virtual AGM.
The chosen technology must still allow members as a whole a reasonable opportunity to participate as required by s 249S of the Act. ASIC has clarified this requirement to include that members are able to ask questions of the auditor and about management, and that voting should occur by a poll rather than a show of hands. If a company’s technology is unable to facilitate these requirements, it would be preferable to postpone the AGM by utilising the two month extension.
However, a company may not be able to hold a hybrid or virtual AGM if the use of such technology is restricted by the company’s constitution. ASIC does not have the power to override a company’s constitution in these circumstances. It is imperative that the company’s constitution is reviewed to ensure a hybrid or virtual AGM is permissible. This must be done on a case by case basis.
supplementary electronic notices
If an AGM is scheduled within the period up until 31 May, companies are able to provide supplementary instructions for online participation. The instructions must be made available to members by sending an email to all members that have provided the relevant details, posting a notice on the entity’s website and providing a market announcement if the entity is listed on a market. The instructions must be provided at least two business days before the meeting is held.
When navigating the new guidelines for holding an AGM during COVID-19, the most important document is the company constitution. If you would like assistance in interpreting your constitution’s position on hybrid or virtual AGMs, or any other of the ASIC guidelines, please do not hesitate to contact our team.
AGMs and other meetings of registered charities
Chapter 2G of the Act (which regulates the timing and conduct of AGMs of public companies) does not apply to companies registered as charities by the ACNC. Those companies are subject to the ACNC’s Governance Standard 2, which (to a lesser degree of prescriptiveness) requires a charity to be ‘accountable to members’.
Holding an AGM (or other meeting) is the most common way a charity meets this accountability requirement – however it is not the only option and is thus not always common practice. As with broader public companies though, charities should have regard to specific requirements (or limitations on the use of technology) in their governing document (which may include an annual meeting by a prescribed date), which notwithstanding the relaxed approaches by the ACNC and ASIC on regulatory requirements, will still generally be enforceable by members and other stakeholders of the charity.
Like ASIC, the ACNC has released some useful guidance to support charities through the practical challenges caused by COVID-19.