COVID-19: temporary changes to meeting provisions under the Corporations Act

On 5 May 2020, the Treasurer issued the Corporations (Coronavirus Economic Response) Determination (No.1) 2020.

The effect of determination is to temporarily modify certain provisions of the Corporations Act for a period of 6 months from 6 May 2020.

The determination will permit virtual meetings for companies, managed investment schemes and creditors and facilitate electronic execution by companies.

Virtual corporate meetings

Before the determination, the generally accepted view was that there was real doubt as to whether an Australian company could hold a “virtual” members meeting, that is a meeting that did not have at least one physical venue at which members could attend in person, if they chose to do so.

COVID-19 related emergency limitations on travel and gatherings have made physical meetings impossible or at least impracticable.

The generally accepted view was that unless a company’s constitution expressly provided for a virtual meeting, a virtual meeting might be invalid. This was subject to a possible validation of procedural irregularities and non-compliance under section 1322 of the Corporations Act.

The determination modifies a variety of provisions relating to meetings under the Corporations Act to enable virtual meetings to be held.

However:

• a virtual meeting must be held using technology that gives all persons entitled to attend a reasonable opportunity to participate
• voting must be taken on a poll and using technology
• attendees must be able to vote “in real time” and where practicable by submitting their vote in advance of the meeting.

Proxies

Proxies can be appointed using one or more technologies specified in the notice meeting.

Notice of meeting

A notice meeting may be given using one or more technologies, by giving them notice or other material or online location where those items can be viewed or downloaded. The determination contains an example of sending a notice or link by email where the company has email addresses of members, and sending a letter or postcard to other members setting out a URL for viewing or downloading the notice and other material.  

The person required or permitted to give a notice of meeting must include information in the notice of meeting about attendees can participate in the meeting, including voting and speaking.

Execution of company documents

The determination also overcomes limitations in the Corporations Act provisions dealing with execution of company documents, in particular section 127. There is case law to the effect that section 127 requires a “single static document” (that is paper document) to be executed by two company officers meaning that company documents cannot be executed remotely or electronically (see Pickard v Bendigo Bank [2019] SASC 123).

However, the determination allows two company officers to sign separate paper copies or counterparts of the same document and allows electronic execution – of an electronic document – by two company officers in separate places.

The method used to electronically execute the document must:

• identify the person signing
• indicate the person’s intention in respect of the contents of the document (that is, the person intends to sign the document for the purpose of the company being legally bound by the document)
• be “as reliable as appropriate” for the purpose of satisfying the above requirements, in light of all the circumstances including any relevant agreement.

In establishing that the method has identified the person and indicated the person’s intentions, regard can be had to additional evidence – not just the method of execution itself.  This will likely prove to be a very useful aspect of the determination.

This all means that the determination should allow a flexible approach to electronic execution. The Explanatory Statement to the determination gives a number of examples, including pasting in a signature, using a touch screen to sign or using a document execution platform.

It is also possible that an electronic message that identifies the company officer, the document and the officer’s intention to “sign” the document would be sufficient even if this would not be considered in ordinary circumstances to be their “signature” of an electronic document. That said, in most circumstances “signing” the actual electronic document would be the preferable approach.

Observations

The Commonwealth Government is to be commended for implementing these measures. They overcome practical problems created by the COVID-19 pandemic and related lockdown and social distancing measures.

It is hoped that in due course these measures will become permanent features of the Australian Corporations Act, to facilitate virtual meetings and electronic execution on an ongoing basis.

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