Australia makes it to the 21st Century – permanent corporate digital measures passed by the senate

Permanent measures for online meetings, electronic notices and electronic execution of document passed by the Senate. Corporations Amendment (Meetings and Documents) Bill

On 10 February 2022, the Australian Senate finally passed the Corporations Amendment (Meetings and Documents) Bill. The Bill was passed by the House on 29 November, but debate on the Bill was incomplete when Parliament rose for the summer break. This caused a few anxious moments since the temporary measures that the Bill was designed to replace were to expire on 31 March 2022, and with a Federal election expected by May 2022, there was limited time and legislative bandwidth for the Government to ensure passage of the Bill. This could have had dire consequences for the mini-AGM season for 31 December balance date companies. In the event, the Bill was given priority and was dealt with in the Senate’s first sitting week.

What does the Bill do?

The Bill makes permanent a number of the temporary changes introduced by “TLAB” – the Treasury Laws Amendment (2021 Measures No.1) Act 2021 enacted in August 2021. The Bill also modifies some of the TLAB temporary measures.

First, the Bill facilitates hybrid and virtual company and managed investment scheme meetings.  Hybrid meetings with both in person and online components are generally facilitated. Fully online meetings are facilitated if permitted or required by a company’s or scheme’s constitution.

This policy setting has been controversial but it is better than having the previous state of confusion about whether hybrid and virtual meetings could be held, thrown into stark relief by the pandemic waves since 2020. Thankfully, TLAB conferred a permanent emergency power on ASIC to permit virtual meetings in appropriate circumstances.

Some companies have proposed and then withdrawn constitutional amendments to permit fully online meetings due to investor unrest, while other proposals have been passed without apparent objection. Time will tell how widespread the innovation of the virtual meeting becomes – noting that the legislation requires that members be given a right to actually speak at an online meeting (whether virtual or hybrid) rather than ask questions or make comments in writing through a chat or similar function. Limitation to written questions and comments was a feature of the early days of online meetings and was probably the main reason for objections by some investors to the form of meeting. However, the functionality of the meeting platforms has now advanced to permit the required two-way communication and many smaller companies can make do with one of the now endemic video conferencing apps.

The Bill also requires that members have a reasonable opportunity to participate in meetings, and that meetings must be held in a reasonable time and place or method – essentially reflecting the general law of company meetings and the implications of the duties of directors and responsible entities.

Second, the Bill rewrites the provisions dealing with document execution by and on behalf of companies to permanently facilitate technologically neutral signing of documents and make a number of improvements:

• a company can enter into a deed through an agent who does not need to be appointed by deed
• a document can be signed electronically under the new provisions without the thing actually signed having to record all the information in the document
• documents can be executed under the statutory procedure (that triggers certain statutory assumption such as due authorisation) by a sole director who is not also the company secretary.

Third, the Bill facilitates lodgement of documents that are electronically signed in accordance with the new electronic signature provisions.

Fourth, the Bill permanently makes sending documents to members electronically the default method, while allowing members to instead require documents to be sent in hard copy form and members can also make ad hoc requests for hard copies to be sent. The Bill facilitates electronic delivery by allowing the sending of a link rather than the entire document and the link can be sent in hard copy form.

The Bill also allows members to require that they not be sent documents at all. 

Importantly, the Bill integrates the new electronic despatch provisions with the currently existing provisions about sending annual reports to members.

When the new default electronic despatch method reform was first mooted, the proposal was that companies and schemes would have to notify all their members of their rights to receive hard copy documents. After much feedback about the cost of such a requirement, the Bill only requires a notification at least once every financial year (so it can be coupled with another communication) or to ensure that the notification is readily available on a website. 

Fifth, the Bill makes a number of other amendments to the meetings provisions:

• The Bill reinstates the former form of section 248D about use of technology in directors meetings, which was repealed by TLAB.
• The Bill requires listed companies to put substantive resolutions that have been notified to members by way of poll, rather than a show of hands.  While this is better practice, there is already an obligation on the chair of a meeting to put a resolution to a poll if that is required to give effect to the true will of the members and there is no evidence of abuse by listed companies trumping the proxy votes of members by having a vote on a show of hands.
• The Bill introduces new requirements for listed companies and schemes to obtain independent reports on the conduct of a poll or scrutiny of the outcome of a poll, if requested by members with at least 5% of votes.

Sixth, the Bill provides for the provisions introduced by the Bill to be reviewed and reported on after two year – but if a report on the online meeting amendments is not tabled in Parliament within 30 months of commencement of those amendments, the ability to hold fully online meetings will cease to have effect. 

This somewhat unusual feature was, presumably, part of the negotiations to secure support for the Bill and while we consider that requirements for post-implementation reviews are generally to be welcomed, this feature means it is possible that in three and half years’ time, corporate Australia will be unable to hold a fully virtual company or scheme meeting, even if expressly authorised by the relevant constitution. Given the amount of time we are all now spending on virtual meetings of all kinds, this does seem a little absurd, particularly noting that the same rule applies to all companies not matter what size or nature.

Concluding observations

The passage of the Bill is to be welcomed and the ongoing certainty it now gives (for the most part) will be of great practical value to Australian companies and schemes, not least those heading into an Annual General Meeting in the coming months.

The Government has foreshadowed a further tranche of amendments in the exposure draft of the Treasury Laws Amendment (Modernising Business Communications) Bill that was the subject of consultation in December 2021. Importantly, that exposure draft contained amendments to facilitate electronic delivery of documents in takeovers under Chapter 6 of the Corporations Act. Given the expected Federal election by May 2022, an apparently packed legislative agenda, and a Senate that is not controlled by the Government, it is not clear that the next tranche will be introduced and passed before the election.

Finally, in other document execution news, in the UK an Industry Working Group of the Law Commission has issued an Interim Report on the electronic execution of documents. The Interim Report is an excellent survey of current law and practice in the UK and contains useful best practice guidelines.

A copy can be accessed at this link:

 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1051451/electronic-execution-documents-industry-working-group-interim-report.pdf

We would encourage Australian Governments to collectively adopt a similar “industry working group” approach to electronic execution of documents, which could form part of the Modernising Document Execution process that was commenced by the Federal Government in 2021 as part of the Modernising Business Communications initiative. See https://deregulation.pmc.gov.au/priorities/modernising-business-communications/modernising-document-execution.[1]

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