Online voting without a proxy

Articles Written by Richard McMullan

Online voting by shareholders without a proxy form has become more and more popular in the last few years. Large companies such as Telstra, Commonwealth Bank and Wesfarmers have put in place procedures to facilitate online voting at meetings by their shareholders. Their actions follow the release of a paper by Chartered Secretaries Australia (CSA) in 2007 entitled "CSA's Guide to Implementing Direct Voting". The paper called on all Australian listed companies to implement online voting.

However, it is important that a company does not

automatically assume that they can use online voting. It is

necessary to change the company constitution to permit

online voting without a proxy form.

There are important differences between online voting versus using an electronic version or reproduction of a proxy form, as summarised in the table below:

 

Unless a company constitution is amended the only way a shareholder can vote at a shareholders meeting is to either: (1) attend the meeting in person; or (2) attend the meeting via their appointed proxy (or attorney if the power of attorney contains the information required by the Corporations Act to be included in a proxy form). Shareholders who are companies can also appoint a "corporate representative" to attend on the company's behalf under the Corporations Act. The appointment of a proxy requires a proxy form to be completed and lodged prior to the meeting.

Online voting does not involve a proxy form. It is a process which starts by collecting information to identify the shareholder and then asks the shareholder to make selections on a computer screen to indicate how they want to vote for each resolution to be considered at the meeting. After a shareholder has identified themselves they can cast their vote quickly with only a few clicks of a mouse.

Importantly, the online voting process does not produce a proxy form, nor does it appoint a person to attend the meeting as a proxy. Because it does not produce a proxy form, the vote can only be a valid vote if the company constitution permits such a method of voting. Without the necessary wording in the constitution, online voting has the same legal standing as a shareholder telephoning the company and advising the person taking the call of the shareholder's voting directions verbally. Such a verbal instruction over the phone is not a valid vote. The constitution amendments are essential because they "deem" a vote cast by online voting as a valid vote when it otherwise would not be.

In contrast, an electronic version or reproduction of a proxy form, such as an editable PDF, would be permitted without any amendment of the company constitution. This view is supported by a recent ASIC media release on 21 April 2010, whereby ASIC confirmed that "proxy documents can be lodged electronically" without a constitutional amendment.

Parliament amended the Corporations Act in 2004 to replace the requirement for all company proxy forms to be signed. Instead of the form being signed the form can be "authenticated" electronically as long as there is an appropriate method of identifying the shareholder. A practice of using the shareholder's HIN or SRN appears to have developed as the method of identifying the shareholder. In order for the electronic proxy form to be valid the process must result in the completed form being received at the nominated point of receipt, normally the company's registry.

Whilst the form can exist in an electronic format such as a PDF as opposed to being printed on paper, the form must still contain the information required by the Act, including shareholders name and address, company's name, name of appointed proxy and the meetings at which the appointment may be used.

Parliament is yet to amend the Corporations Act to recognise electronic authentication of proxy forms for managed investment schemes such as investment or property trusts. This means that Responsible Entities must continue to use paper proxy forms until electronic authentication is recognised.

Companies wishing to implement online voting should consider using their next AGM as an opportunity to ask their shareholders to approve the necessary constitutional amendments.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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