ASIC allows tele-AGMs
The finance regulator has questioned the legal status of AGMs conducted via teleconferencing.
As more companies plan to virtual and ‘hybrid’ annual general meetings (AGMs) to get around COVID-19 social distancing requirements, the Australian Securities and Investments Commission (ASIC) has questioned the strength of resolutions made under the new measures.
Under normal circumstances, companies face stiff penalties and legal action if they fail to communicate details of AGMs to stakeholders or hold the meetings within certain periods.
Bu some of this is not possible anymore, and while the regulator says it does not have an issue with electronic AGMs, they must not breach company constitutions or they could affect the legal standing of votes.
“ASIC considers that hybrid AGMs are permitted under the Corporations Act but entities need to check whether their constitution restricts meetings being held in this way. ASIC does not have the power to modify the Corporations Act to facilitate hybrid AGMs where they are not permitted under an entity’s constitution,” ASIC said in a bulletin.
“There is some doubt as to whether the Corporations Act permits virtual AGMs and there may also be doubt as to the validity of resolutions passed at a virtual AGM. ASIC does not have the power to modify the Corporations Act to facilitate virtual AGMs. However, we have provided a no-action position on virtual AGMs… Entities should also consider whether they can hold a virtual meeting under their constitution.”
Many disgruntled shareholders seek the opportunity to roast directors face-to-face on an open microphone at a live AGM.
ASIC says that while virtual AGMs can shut out shareholders and members, the regulator suggested the companies use the ‘no action’ penalty holiday on late meetings, rather than trying to force changes through online.
“Postponing an AGM where an entity has made advanced preparation may cause significant cost and inconvenience, but holding an AGM where few members can participate either in person or online might not comply with the Corporations Act and produce an unsatisfactory outcome,” ASIC said.