Certainty and modernisation of the Corporations Act for electronic meetings and execution
Corporate News - 22 February 2022
In welcome news, both Houses of Parliament have approved permanent reforms to the Corporations Act 2001 (Cth) (Corporations Act) enabling companies and registered schemes to use technology to hold meetings, execute company documents and sign and distribute meetings-related documents.
Importantly, whilst the permanent changes are similar to the current temporary measures which are set to expire on 31 March 2022, they are not identical.
A summary of the permanent position is set out below.
Electronic meetings and distribution of documents (effective date: 1 April 2022)
- Meeting materials can be signed and given electronically (whether by a physical or electronic link or the entire document) regardless of the format of the meeting. However, members can elect to receive those materials in their preferred format (i.e., physical or electronic copies), provided the election is made within the required timeframes under the Corporations Act. They can also elect to not receive annual reports and other documents prescribed in the regulations. Historical requests by members made prior to 1 April 2022 will be honoured and will not need to be repeated.
- Companies must at least once every financial year notify members of their right to elect to receive documents in hard copy and must take reasonable steps to comply with the requested form.
- Hybrid or entirely virtual meetings can be held, but wholly virtual meetings will only be allowed if expressly permitted under the company’s constitution. Whatever format is used, members as a whole must be given a reasonable opportunity to participate, and any technology used must allow members to exercise, orally and in writing, any rights those members have to ask questions and make comments.
- Substantive resolutions for listed entities will need to be conducted by way of a poll, in line with ASX corporate governance requirements for listed entities.
- Members with at least 5% of voting power can request to have an independent person appointed to observe and/or prepare a report on a poll conducted at a members’ meeting.
Electronic execution of documents (effective date: day after the Corporations Amendment (Meetings and Documents) Bill 2021 is given Royal Assent)
- Company documents (including deeds) and meeting related documents can be validly executed in a ‘technology neutral manner’. This means that documents signed in accordance with section 126 or 127 of the Corporations Act can be signed either in physical or electronic form (and in fact, one director may sign a physical form of the document with another director signing an electronic form). Importantly, documents required to be lodged under the Corporations Act can be signed electronically.
- Companies can rely on the assumptions under section 129 of the Act when electronically executing documents.
- A company can enter into a deed through an agent who does not need to be appointed by deed.
- Corporate deeds need not be witnessed or delivered to be valid (although companies can agree that the deed does not take effect until delivered/exchanged if that is the intent of the parties).
- Proprietary companies with a sole director (who is not also the company secretary) may now validly execute a document.
Please contact us in our Perth office on +61893214000 or our Melbourne office on +61391119400 if you would like further detailed information in relation to any of the reforms noted in this article.