Australian Institute of Company Directors and Justice Connect

The COVID-19 pandemic has had far-reaching implications for not-for-profit (NFP) organisations and, for most, their usual activities and service delivery have been significantly impacted. Measures implemented to prevent the spread of COVID-19, such as physical distancing restrictions, have also impacted the ability to hold member meetings, including annual general meetings (AGMs).

AGMs are often important events for NFPs, providing a chance for members and other stakeholders to gather, hear about the organisation’s activities and financial position for the previous year, ask questions, discuss plans for the coming year and celebrate achievements. AGMs also provide an opportunity for essential governance activities, such as electing board members, appointing auditors and (if needed) changing governing documents. Generally, these activities will involve a vote of the members and it is important to make sure that any relevant procedures in relation to voting are followed.

A suggested checklist for planning your virtual meeting is set out at the end of this tool.

The Federal Government (which regulates companies limited by guarantee) and state and territory governments (which regulate incorporated associations) have for the most part announced temporary measures to facilitate the holding of virtual member meetings to allow organisations to deal with the restrictions imposed by COVID-19.

The AICD and Justice Connect have welcomed the emergency relief measures, but are also calling for wider reform acknowledging the capacity for technology to improve accountability and efficiency, and highlighting the advantages of modernising out-of-date legislative provisions in the Corporations Act and applicable state and territory legislation. Virtual meetings may also make it possible for members to attend AGMs when they were unable previously due to geographic constraints or other challenges.

This guidance outlines what NFPs need to consider before hosting a virtual or hybrid meeting, including:

  • how to determine if you can hold a virtual or hybrid meeting (including where there is temporary relief available due to emergency COVID-19 measures);
  • facilitating member and stakeholder engagement; and
  • key legal obligations to consider.
A virtual meeting is one where all members attend electronically (via video or tele-conference platform). Members can virtually view proceedings, ask questions and vote.
A hybrid meeting is where the chair and some management are 'live' at one location, but all proceedings are conducted electronically. Members can virtually view proceedings, ask questions and vote.

How do you determine if you can hold a virtual or hybrid AGM? Check your governing document

1. What do your rules (sometimes called your constitution) say?

An organisation’s governing documents and any laws that apply to it (such as the Corporations Act or the state and territory incorporated association laws) may set out requirements around holding virtual or hybrid AGMs. In some cases, governing documents may not permit a hybrid or virtual meeting.

The first question to ask is what do your organisation’s rules say about holding a virtual or hybrid AGM?

If your rules and/or your regulator (as applicable) ALLOW you to use technology to run general meetings, you can conduct a virtual AGM. This applies to all companies limited by guarantee and all incorporated associations in Vic, NSW and SA regardless of what is said in the organisation’s rules. This also applies to incorporated associations using the model rules in Qld and WA Yes
 If your rules are SILENT or UNCLEAR about using technology to run general meetings, you may need to seek legal advice.
This applies to incorporated associations using the model rules in NT, Tas and ACT
 Maybe
If your rules DO NOT ALLOW you to use technology to run general meetings, you may need to notify your members and your regulator of your intention to postpone your AGM (e.g. if a quorum is only constituted by members attending in person).
Most regulators have a simple form for this purpose.
Consider the process for changing rules to allow remote meetings so you can hold remote meetings in future.
 No

2. What is your legal structure and AGM requirements?

There are several different formal and informal legal structures that NFPs may take, including companies limited by guarantee (CLGs); incorporated associations (IAs); indigenous corporations (that is, a CATSI corporation), co-operatives and unincorporated associations.

NFPs with other structures will need to consult their governing rules and regulations however, our principles and tips will provide some guidance on holding a virtual AGM.


 Charity structured as a CLG   NFPs structured as CLGs (not registered as a charity) Incorporated associations Indigenous corporations 
 AGM requirement





















 Most of the meeting provisions in Part 2G.2 of the Corporations Act are 'switched off'(for example, the obligation to call an AGM).

Instead, a charity CLG must take reasonable steps to comply with ACNC's Governance Standard 2. This Standard requires a registered charity CLG to:

  • take reasonable steps to be accountable to its members; and
  • allow its members adequate opportunities to raise concerns about how the charity is run.

Even though an AGM is not mandated, many charities use the AGM to help ensure they meet the Standard. It could also be required in their governing document.





A non-charitable CLG must comply with the requirements for holding meetings contained in the Corporations Act.

Non-charitable CLGs are required to:

  • hold an AGM each year and comply with requirements for giving members notice of the meeting, voting requirements, taking and storing of meeting minutes, and other requirements set out in the Corporations Act; and
  • meet any extra requirements set out in their constitution













All incorporated associations across States and Territories and Indigenous corporations are required to hold an AGM annually. However, specific requirements vary across States and Territories.

The requirements for other legal structures are governed by specific legislation (for example, co-operatives) and/or the organisation’s rules (for unincorporated groups).

Refer to section “Key legal obligations to consider” below, for links to useful resources to determine your AGM requirements.











 

 COVID-19 requirement




















If a charity is unable to hold meetings because of government requirements on physical distancing, the ACNC recommends the charity:
  • advise or consult with members on the reasons for the postponement;
  • document the reason why the meeting did not occur or could not occur digitally; 
  • use alternative ways to communicate the information that it would have provided at that meeting to members; and 
  • schedule a future date for the meeting (even if this needs to be amended again later). 

An option at this time may be to hold meetings remotely via video or phone conference.

 

Under temporary amendments to the Corporations Act (COVID-19 emergency powers), NFPs structured as  CLGs will be able to: 
  • provide notice of general meetings to members using email; 
  • satisfy quorum requirements with members attending online; and 
  • hold virtual general meetings. 















For incorporated associations, the approach of the relevant state or territory regulators varies.

Refer to section “Key legal obligations to consider” below, for links to useful resources to determine your AGM requirements.













 



3. Facilitating member and stakeholder engagement

Even (and perhaps especially) in a virtual world, NFPs and their boards want to ensure that they can continue to communicate with members and other stakeholders who would typically attend AGMs (beyond simply ensuring compliance with legal and regulatory requirements).

To this end, it is important to consider:

  • whether to open the virtual meeting to all stakeholders and supporters (rather than restricting it to members);
  • whether and how best to incorporate engagement-focused (rather than compliance-driven) agenda items, including any guest speakers, awards and recognition presentations;
  • the important role of the chair in managing the conduct of the meeting; and
  • how to communicate with members and stakeholders, including content of the required (legal) notice of meeting.


Technology providers and capability

Some providers of video conferencing software offer free versions with basic functionality and capabilities − this might be all your organisation needs. However, you may need to pay for an advanced business plan or similar that provides functionality to ensure, for example, members (and other stakeholders) can interact. There may be extra technology-related costs that come with a remote meeting – for example, devices, microphones or webcams.

It’s important to use a technology platform that is reliable and familiar. Before the meeting, the chair needs to make sure they are familiar with the technology and have conducted a ‘dress rehearsal’ of the meeting, including using any presentation slides that will be shown, moderating and answering questions, and conducting voting (discussed further in section “Key legal obligations to consider” below).

Technology issues during an AGM

At the start of the meeting, the chair should explain to members what will happen if common technical issues arise. In general, if common technology issues result in a significant number of members being unable to reasonably participate, the chair should adjourn the meeting until the problem is remedied. What is considered significant will vary across organisations, but generally speaking if a problem effects five per cent or more of the members, then the chair should consider adjourning the meeting for 30 to 60 minutes while the technology issues are addressed. Since an adjourned meeting is (legally) just a continuation of the original meeting, all valid proxies from the original meeting will also apply at the adjourned meeting.

The role of the chair

The chair has a vital role in the conduct of a meeting. It is the chair’s primary role to ensure that the meeting works as an effective forum for member participation. The chair exercises procedural control over the meeting and ensures that the business of the meeting takes place efficiently and without undue disruption. This includes:

  • Preliminary process considerations:
    • ensuring compliance with the notice and quorum requirements of the meeting;
    • preserving order at the meeting;
    • putting to the meeting every matter for which proper notice has been given broadly in conformity to the agenda;
    • conducting the proceedings fairly and in accordance with the constitution including making sure that there is clarity around how members can submit questions.
  • Questions:
    • enforcing sensible standards of reasonable debate and discussion;
    • acting as an intermediary and moderator in allowing members a reasonable opportunity to ask questions and make comments about the management;
    • asking and answering questions, including facilitating a Q&A process that is fair, balanced and reasonable, that promotes member trust and is transparent as to which questions were not answered;
    • ensuring that there is a reasonable opportunity for members to ask questions about or make comments on the management, and to ask questions of the auditors or their representative.
  • Voting:
    • putting in place internal processes and protocols around questions and transparency, for example how questions will be recorded or grouped;
    • calling for, overseeing and declaring the results of the poll when known.
  • Adjournment and closing:
    • adjourning a meeting;
    • declaring the meeting closed, at the conclusion of business;
    • vouching for the correctness of the minutes by signing them.

In virtual and hybrid meetings, the chair should also consider:

  • their role as an online host, the role of technical support and how clear instructions about how to participate via the platform will be provided;
  • a board briefing session to rework standard procedures, manage expectations and test scripts;
  • how questions will be monitored, moderated and answered using the chosen technology;
  • how online polls will be conducted, and final results shared;
  • how presentation slides need to be framed and timed in order to keep a virtual audience engaged, noting some stakeholders may only dial-in for specific agenda items; and
  • how to transfer the skill of ‘reading’ (gauging) the room where you can see people’s faces, to a virtual environment that may not give similar face-to-face interaction.

Member participation

It is important that items of business be discussed in an ordered way even when it needs to be managed using technology.

In general, unless the constitution provides otherwise, members authorised to be present at the meeting have a right to speak. Debate provides an opportunity for members to state their views before the meeting decides a resolution by voting. This means the chair needs to understand how the virtual meeting operates. The chair should understand how questions are submitted and moderated and should be an active participant in the design phase of the meeting to ensure the process is fair. The technology provider may provide a verification service to confirm that members can ask questions and interact with management through the chair in a way that as nearly as possible replicates the process for a physical meeting.

4. Key legal obligations to consider

Justice Connect’s specialist Not-for-profit Law service has free resources to explain the legal requirements of holding meetings, covering all states and territories and the common types of NFP legal structures: www.nfplaw.org.au/meetings. They also have a range of comprehensive toolkits about the legal requirements associated with running organisations, including holding meetings (with sample agendas and checklists) − these toolkits are available for Victorian and NSW incorporated associations, and for CLGs (charities and non-charities): www.nfplaw.org.au/toolkits. For some organisations who need more assistance, the Not-for-profit Law service can provide free legal advice: www.nfplaw.org.au/advice.

Law firm Gilbert & Tobin has provided a publicly available, free resource designed to help charities and NFPs understand the requirements for holding AGMs, particularly in the current COVID-19 climate. This is a useful resource to assist charities and other NFPs (regardless of legal structure) navigate compliance requirements. Access the app here.

We have set out comments on particular legal issues you may wish to consider below.

Quorum requirements

Before the meeting, check what your quorum is (minimum of members required so the meeting can proceed). This will be set out in your governing documents (or in the legislation covering your legal structure).

Under the COVID-19 emergency powers that apply to NFPs structured as CLGs, the Federal Treasurer’s determination means that all people participating in the virtual or hybrid meeting will be taken, for all purposes, to be present at the meeting while participating. This means physical attendance for things like achieving a quorum may be met using technology. If your organisation is not covered by this determination, check your governing documents and relevant legislation for the quorum requirements and whether there are any limitations from attending virtually.

Ability to appoint a proxy

A proxy is a person authorised to vote on behalf of a member if the member cannot attend the meeting themselves.

For CLGs, the Corporations Act provides mandatory rules around proxy voting, including the right to appoint a proxy to vote on their behalf at general meetings. For charities not subject to the Corporations Act, check your governing documents for provisions on proxy voting (if any, noting some organisations do not allow voting by proxy).

If a member is entitled to appoint a proxy, the Corporations Act states that the Notice of Meeting must make it clear that a member has the right to appoint a proxy (who does not have to be a member of the organisation). In addition, if a member is entitled to cast two or more votes, they can appoint two proxies and specify the proportion or number of votes that each proxy is entitled to exercise.

The COVID-19 emergency powers that apply to NFPs structured as CLGs provide that:

  • a company must treat a duly appointed proxy in the same way as the appointer for the purpose of conducting the meeting; and
  • a proxy may be appointed using one or more technologies specified in the notice of the meeting.

Voting and conducting a poll

Under the COVID-19 emergency powers that apply to NFPs structured as CLGs, ASIC recommends that where practicable, voting via online or by other means should also be available before the meeting; however, this should not be the only option.

All voting at a virtual or hybrid meeting should be by a poll rather than a show of hands. This may mean a shift in practice for many NFPs.

Procedures for taking a poll (whether on the agenda or ad hoc) will differ – depending on whether the poll occurs immediately or at a later date. The procedure will be governed either by the constitution or by general law, which has a strong underpinning requirement of fairness. Most platforms have capacity for online voting and this feature should be used to ensure members have a meaningful opportunity to hear the arguments being made, and vote in response to them.

The chair must carefully explain the procedure to be followed in the poll and how the electronic voting process will work. Some members will be unfamiliar with online voting processes and will need to clearly understand the procedure to be followed. As with the physical meeting process, the chair will appoint a person to be responsible for scrutineering and counting of votes.

Whether a physical or a virtual member meeting, the voting process must allow for the verification of the voter, designate the capacity in which the voter is voting (for example, as a member, proxy, representative or attorney) and the number of votes represented.

As usual, a person who is proxy for a number of people may need to identify that they are voting separately for each proxy. The chair should ensure that all members entitled to vote have voted by asking any members who have been overlooked to identify themselves.

There are different processes for announcing the results of the poll to the meeting. In some cases, the organisation will pause the meeting and, after completion of the count, the chair will announce the result of the poll to the meeting (perhaps there will be a guest speaker or presentation of awards while this is happening). In other cases the chair may close the meeting and communicate the results of the poll by posting on the organisation’s website or sending a communication (for example, an email) to all members.

Suggested checklist for conducting a virtual or hybrid meeting

Use of technology

  • Is your preference to hold a ‘virtual’ (fully online) or ‘hybrid’ (a mix of online and physical) meeting?
  • Do your governing documents allow for the use of technology at general meetings? What legal requirements apply, and is there any extra leeway provided by the regulator in the COVID-19 context?
  • Does the Notice of Meeting set out how members can participate in the meeting using technology?
  • What is the back-up plan if there are technical issues?

Facilitating questions

  • Will members be able to submit questions before the meeting?
  • How can members ask questions during the meeting?
  • Will you allow non-member stakeholders to participate during the meeting?
  • How will questions be moderated?
  • How will you keep records of questions, comments and answers?

Chairing the meeting:

  • Are you familiar with the quorum requirements of the meeting?
  • Have you had a ‘dress rehearsal’ of the meeting using technology? Do you know how to use the platform, including using presentation materials, passing over to other speakers, moderating questions, and conducting voting?

About Justice Connect

Justice Connect is a charity providing legal services to bridge the justice gap. We connect people and community groups with the lawyers and the legal help they need. We identify where laws and systems are unjust and we advocate for system change.

Not-for-profit Law is Justice Connect’s specialist service for charities and community groups, the only one of its kind in Australia. Community groups and not-for-profits should spend their time building better communities, not buried under complicated rules and regulations. We give groups the help they need so they can spend their time doing what they do best. When Australia’s not-for-profit organisations are strong, so are our communities. We help the helpers, giving them a fair chance at building a better Australia.

About the Australian Institute of Company Directors

The Australian Institute of Company Directors is committed to strengthening society through world-class governance. We aim to be the independent and trusted voice of governance, building the capability of a community of leaders for the benefit of society. Our membership includes directors and senior leaders from business, government and the not-for-profit sectors.

Disclaimer

This document is part of a Director Tool series published by the Australian Institute of Company Directors. This series has been designed to provide general background information and as a starting point for undertaking a board-related activity. It is not designed to replace a detailed review of the subject matter. The material in this document does not constitute legal, accounting or other professional advice. While reasonable care has been taken in its preparation, the Australian Institute of Company Directors does not make any express or implied representations or warranties as to the completeness, currency, reliability or accuracy of the material in this document. This document should not be used or relied upon as a substitute for professional advice or as a basis for formulating business decisions. To the extent permitted by law, the Australian Institute of Company Directors excludes all liability for any loss or damage arising out of the use of the material in this document. Any links to third-party websites are provided for convenience only and do not represent endorsement, sponsorship or approval of those third parties, or any products and/or services offered by third parties, or any comment on the accuracy or currency of the information included in third party websites. The opinions of those quoted do not necessarily represent the view of the Australian Institute of Company Directors.