Expiry of COVID-19 relief measures - general meetings and electronic execution of documents
Early in 2020, the Federal Treasurer published the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 which was later repealed and remade by the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination No. 3) (collectively, the Determinations).
The Determinations modified the Corporations Act and the Corporations Regulations in direct response to the disruptive effects of the COVID-19 pandemic on corporate activity.
Broadly, the Determinations allowed for:
annual general meetings (AGMs) and other general meetings to be conducted entirely electronically; and
the electronic execution of documents by companies in accordance with s 127 of the Corporations Act (including expressly permitting split execution),
so long as the legislative requirements specified under the Determinations were complied with.
With the expiry of Determination No. 3 on 21 March 2021, however, there is now considerable uncertainty moving forward over the validity of virtual shareholder meetings and the effectiveness of documents signed using digital methods.
ASIC No-Action – Electronic AGM and meetings
In response to the continued uncertainty caused by the ongoing COVID-19 pandemic, ASIC announced on 29 March 2021 that it will adopt a no-action position in relation to non-compliance with provisions of the Corporations Act that may prevent the convening and holding of virtual meetings, including AGMs.
This is a temporary measure for meetings held between 21 March 2021 and the earlier of 31 October 2021 and the date (if any) that any measures are passed by Federal Parliament relating to the use of virtual technology in meetings of companies. ASIC intends to review its no-action position in September 2021 or earlier if relevant measures are introduced by Parliament.
While ASIC does not have the power to modify the Corporations Act, moving forward (and until at least 31 October 2021), ASIC (as the regulator responsible for the administration and enforcement of the Corporations Act) will not bring regulatory action against companies who are in non-compliance with the provisions of the Corporations Act in convening meetings electronically and holding virtual meetings, provided the conditions set out in the no-action position are satisfied and ASIC’s guidelines for investor meetings using virtual technology are followed.
In terms of electronic execution of documents, ASIC has unfortunately confirmed in two separate media releases (dated 23 March 2021 and 29 March 2021) that it will not be endorsing a no-action position in relation to electronic execution of documents by companies on the basis that these measures are primarily concerned with the capacity of companies to enter into arrangements with third parties, rather than Corporations Act obligations to be administered and enforced by ASIC.
This means that the legacy of uncertainty which surrounds the validity of electronic execution under s 127 of the Corporations Act will remain an issue for companies.
It is our recommended that directors continue to sign documents in accordance with s 127 of the Corporations Act with ‘wet ink’ (and avoid split execution) to ensure the benefits of the assumptions under s 129 of the Corporations Act are available.
In better news, the Australian Government has proposed to extend the measures in the Determinations, including the electronic execution of documents, in the Treasury Laws Amendment (2021 Measures No.1 Bill 2021) (Bill). The Bill was passed by the House of Representatives on 17 March 2021 but is awaiting debate in the Senate.
If you are the director of a company, there are three key take-aways:
the Determinations allowing virtual meetings, AGMs and electronic execution of documents have now expired;
ASIC has expressed that it will take a no-action position against companies which choose to conduct their AGMs or other meetings virtually, provided certain conditions are satisfied; and
electronic execution is no longer a clearly valid form of execution, and may not provide the benefits of the assumptions under s 129 of the Corporations Act.
As always, if you have any queries about the above, or are otherwise unsure about your legislative obligations as a company director in this area, please contact our team at firstname.lastname@example.org or call our office during business hours at (07) 5647 4600.