ASIC has today released Guidelines for meeting upcoming AGM and financial reporting requirements that are temporarily impacted by restrictions on large-group gatherings and travel restrictions amid the COVID-19 situation.
As part of a range of regulatory relief and update guidance released 31 April 2020, ASX endorsed ASIC’s guidance on temporary measures for upcoming AGMs for listed companies. In particular, ASX supports companies providing supplementary information to shareholders for online participation and voting electronically via their website and the ASX market announcements platform, where a notice of meeting may have already been dispatched. A copy of the ASX’s temporary relief package is available here.
These Guidelines followed extensive engagement by AICD and other stakeholders with ASIC in recent days. A copy of ASIC’s Guidelines are available here.
For public companies (both listed and unlisted) with a financial year end of 31 December 2019 that are required to hold an AGM by 31 May 2020, ASIC has formally announced:
- a two-month extension by ‘no action’ position; and
- a ‘no action’ position on virtual AGMs.
Two-month extension for AGMs due by 31 May 2020
As ASIC does not have the power to grant extensions of time to hold an AGM on a ‘class basis’, it has therefore opted to provide a ‘no action’ position on upcoming AGMs that need to be deferred beyond the 31 May 2020 deadline.
Accordingly, those entities will be eligible for a two-month extension and able to hold their AGM by 31 July 2020.
However, this extension period will remain under review and we would expect, although ASIC has not yet advised, to see similar measures apply for those entities with a 31 March and 30 June financial year end should the COVID-19 restrictions on large gatherings continue.
‘No action’ position on virtual AGMs
ASIC has acknowledged that some entities may wish to proceed with holding their AGM by 31 May 2020 or during the extension period, using appropriate technology to comply with COVID-19 restrictions. This may include:
- ‘Hybrid’ AGMs (where there is a physical location and online facilities) – which are permitted under the Corporations Act, but entities will need to check whether their constitution restricts meetings being held in this way; or
- ‘Virtual’ AGMs (that are conducted solely online) – noting that there is some doubt as to whether the Corporations Act permits virtual AGMs as well as concerns around the validity of resolutions passed at a virtual AGM.
While ASIC does not have the power to modify the Corporations Act to facilitate virtual AGMs, it has opted to provide a ‘no action’ position on non-compliance with provisions of the Corporations Act that may restrict virtual AGMs where entities elect to hold a virtual AGM for those entities needing to comply with the 31 May 2020 deadline or otherwise during the extension period.
Importantly, the ‘no action’ position is conditional on an entity’s AGM-facilitating technology providing members with a reasonable opportunity to participate in accordance with section 249S of the Corporations Act, including:
- being able to ask questions of the auditor and about management; and
- voting occurring by a poll rather than a show of hands.
As with hybrid AGMs, entities will need to consider whether they can hold a virtual AGM under their constitution.
Charitable organisations and COVID-19
For charities, the situation is slightly different as the Australian Charities and Not-for-profit Commission (ACNC) does not require unincorporated associations or companies limited by guarantee to hold an AGM. Instead, they must comply with the requirements of ACNC Governance Standard 2, which requires the charity to be accountable to members.
This is a flexible, principle-based standard that allows charities to consider how best to be accountable to their members in their particular circumstances. Many charities may hold meetings to comply with this standard, however this may need to be reconsidered in light of COVID-19.
Further guidance for charities on the impact of COVID-19 is available from the ACNC here.
Financial reporting obligations
At present, ASIC does not consider there to be indications of any significant issues for entities in meeting their full-year and half-year financial reporting obligations at 31 December 2019, but will be closely monitoring developments that may affect financial reporting over the coming months.
AICD monitoring and engagement
While these measures are welcome, critically, ASIC does not currently have the power under the Corporations Act to enable fully virtual AGMs and its ‘no action’ position will not necessarily remove the risk of legal action from third parties. Nonetheless, it is a pragmatic solution that ASIC can facilitate without legislative amendment in the current environment.
As it is not yet known how long current public health restrictions will be in place, the AICD will continue to discuss with government options for urgent legislative reform to enable virtual AGMs and update members as the situations unfolds.