AGMs and Coronavirus (COVID-19) – Issues for Australian Boards
Coronavirus (COVID-19) has created many issues for Australian boards that must be dealt with in the coming months including the legal requirement to have an annual general meeting (AGM).
With the need for social distancing and the advice from the various level of government not to travel, how does an organisation—both Corporations Act 2001 (Cth) entities and incorporated associations—conduct an AGM?
The options are:
- Traditional AGM—members meet in person, but only if social distancing can be assured—an option for those organisations with a small membership, however, this is increasingly difficult as restrictions are tightened.
- Hybrid AGM—with a limited number of members present at the physical location if social distancing can be assured and the rest participating through technology.
- Virtual AGM—all members participate through technology.
While there are options, another difficulty for some organisations will be whether a different format is allowed, as some constitutions (or rules) will be written such that the use of technology is not permitted.
What can be done?
ASIC has released its “Guidelines for meeting upcoming AGM and financial reporting requirements” and is taking a “no-action” position on AGMs where certain conditions are met. This means the regulator will not take action against an entity with a financial year end of 31 December 2019 who fails to hold its AGM by 31 May 2020 (and therefore fails to comply with section 250N(2) of the Corporations Act) provided the entity holds the AGM by 31 July 2020 or such later date as ASIC advises.
For those organisations needing to or considering holding a hybrid or virtual AGM rather than deferring the AGM until a later date, they should check their constitutions and seek advice regarding the ability to hold a general meeting this way and the steps they should take.
For those organisations able to conduct an AGM utilising technology, the technology used must provide members as a whole a reasonable opportunity to participate (Corporations Act, s. 249S). ASIC suggests that this must enable members to:
- ask questions of the auditor and about management; and
- vote by poll rather than a show of hands.
If an incorporated association believes it might need to delay or postpone its AGM or hold its AGM utilising technology, it will need to check information with its state or territory regulator (for incorporated associations) for further guidance on the requirements and seek advice.
What should we tell our stakeholders?
With respect to AGMs, it is important that the board ensures the organisation communicates with its members and key stakeholders to, for example:
- advise or consult with members on the reasons for a change of AGM format;
- document the reason why the AGM cannot occur in the usual timeframe and must utilise technology; or
- advise of the process for participation in the meeting and voting.
Entities should also review their constitution or rules and consider whether amendments should be made to facilitate more flexible meetings in the future. If so, the AGM may provide an opportune time to propose these amendments to members for approval.
For listed companies, disclosure to the ASX must also be considered.
Organisations should also engage with their regulator to discuss any limitations they are facing in organising their AGMs.
What can Effective Governance do to help?
Along with our legal partners HopgoodGanim, we are here to help if you would like to discuss any issues regarding your organisation’s 2020 AGM, any upcoming extraordinary general meeting (EGM) or any other matters related to the current situation. For example, in relation to AGMs and EGMs, we can:
- Review your constitution and advise on your options
- Assist with managing the key aspects of your AGM or EGM
- Develop strategies for stakeholder communications to reassure them that the organisation is in safe hands
- Liaise with the regulator.
Our Other Services
In times of crisis, good governance is especially important. As such, we continue to offer our other services including
- Reviewing the performance of the board, chair, directors and committees
- Identifying current and required skills for directors and boards
- Developing tailored policies and charters, e.g. Work From Home
- Assisting with the CEO remuneration and evaluation processes
- Professional development tailored for your organisation’s needs
- Facilitating the development of strategy in a post-coronavirus environment
- Establishing effective risk governance processes including business continuity and crisis management
In addition, we provide boards and senior executives with governance advice to improve their overall effectiveness.