New move to permanent virtual AGMs

This article was current at the time of publication.

The Australian Government plans to introduce permanent reforms later this year to give companies the flexibility to use technology to hold virtual or hybrid meetings and sign and send documents electronically, Treasurer Josh Frydenberg has announced.

His comments follow interim legislation passed in August this year which extends earlier temporary relief measures that allow companies to use technology to meet their regulatory requirements under the Corporations Act 2001 during the COVID-19 pandemic.

The measures are now extended to 31 March 2022, giving entities the ability to hold annual general meetings (AGMs) later this year and early next year.

The legislation also gives the Australian Securities and Investments Commission (ASIC) permanent powers to provide individual or class order relief concerning meetings and sending documents in circumstances beyond companies’ control, such as those caused by COVID-19.

CPA Australia welcomes changes

Ram Subramanian, Senior Manager Reporting Policy at CPA Australia, describes the changes as a great initiative by the government to modernise elements of corporate communications. 

In a joint submission in July, CPA Australia and Chartered Accountants Australia and New Zealand (CA ANZ) welcomed the government’s exposure draft legislation, noting it would allow businesses to push forward with changes to embed digital technologies within their own corporate governance structures and document processes. 

The submission noted that companies have coped well with the temporary use of digital technologies put in place during COVID-19 and benefitted from the redistribution of resources typically used to fund physical meetings and print and posted documents.

Other professional organisations, such as the Australian Institute of Directors (AICD), have also welcomed the move.

Trepidations still exist

Not everyone, however, is happy about allowing companies to choose whether to hold a virtual AGM.

Vas Kolesnikoff, Head of Australia and New Zealand Research at proxy advisory firm Institutional Shareholder Services, believes virtual-only shareholder meetings diminish shareholder rights and limit their abilities to engage with corporate officials and raise questions. This, he says, hinders the transparent expression of views. 

Allan Goldin, Chair of the Australian Shareholders’ Association (ASA), describes them “as a sterile format where companies are able to ignore questions and gloss over details”. 

Further, ASA CEO John Cowling says they are unable to replicate the feel of a physical or hybrid meeting, given limitations in the technological solutions currently in general use.

“This applies both at the company end and in the homes of shareholders across Australia,” he says.

“Until such time shareholders at a virtual meeting are able to see what questions submitted online are asked, answered and ignored in the meeting, the level of transparency and ultimately trust will be lower than for a physical or hybrid meeting.”

With electronic communications of documents, the ASA’s position remains that these should be default with an “opt-in” for mailed communications. 

Subramanian notes that although there are no details yet, the government plans to run a pilot program to test virtual AGMs before making them a permanent fixture. 

“It’s important to have the ability of hybrid meetings so those wanting to attend in person can do so and those who want to attend electronically can too,” he says. “Shareholders should have the same rights regardless of whether they wish to attend meetings in person or electronically.”

Making laws technology neutral

The legislative changes are, however, just one part of the government’s broader agenda to modernise business communications. 

In April, Frydenberg said the government was committed to modernising laws within the Treasury portfolio so they would become technology neutral. “This will enable easier communication between businesses, individuals and regulators,” he said.

The first phase of changes include:

• Expanding the range of documents that can be validly signed electronically.
• Increasing the range of documents that can be sent electronically to shareholders and amending requirements to contact lost shareholders.
• Improving flexibility for customers when changing address and consenting to electronic communications with credit providers.
• Removing prescriptive requirements for notices to be published in newspapers, where suitable alternatives have been identified.
• Addressing provisions in Treasury legislation where only non-electronic payment options are in place.

The government intends to finalise legislation dealing with phase one by the end of 2021.

Frydenberg added that subsequent phases will consider reforms in additional areas that could benefit from greater technology neutrality, including:

• Communication with regulators (for example, the conduct of hearings).
• Reducing or removing Treasury portfolio legislation exemptions to the Electronic Transactions Act 1999.
• Product disclosure and recordkeeping requirements.

Treasury has recently asked for submissions on a consultation to modernise document execution across the Federation.  This also forms part of the agenda modernisation agenda. 

However, Subramanian believes the government should try to ensure all these moveable parts fit together. “That’s quite important. Otherwise, it becomes a bit of a piecemeal thing where one thing doesn’t necessarily fit well with another piece in the same puzzle.”

The joint submission noted: “We encourage Treasury to consider an overarching framework that clearly outlines how amendments, such as those in this exposure draft, complement other existing [or future] modernising and deregulation projects.”