The government is reviewing laws allowing virtual and hybrid AGMs, and ASIC’s structure and performance are under the spotlight in a new Senate committee report.
Review of virtual/hybrid AGMs
When COVID lockdowns took effect, one of many challenges facing organisations was outdated Corporations Act 2001 governance processes. Holding virtual or hybrid AGMs, electronically executing and circulating corporate documents, and even electronically signing board minutes required ASIC “no action” notices and temporary relief from the then Treasurer under COVID-19 emergency measures. The AICD and others, including the Governance Institute of Australia, warmly welcomed legislative changes in 2022 making these relief measures permanent.
The federal Treasury recently launched a statutory review of these changes with an independent panel (Dr Robert Austin AM, Judith Fox MAICD and Helen Bird) and consultation paper. The review is looking at the effects the reforms have had on:
Meetings: including whether (compared to physical meetings) virtual or hybrid AGMs have created challenges for shareholders/members participation, costs and benefits, and any feedback on the impact on directors’ meetings.
Documents: including whether the changes achieved their aim of flexible, technology-neutral signing and execution of documents, and whether fraud or misuse have emerged.
A final report is to be provided to government by 14 August 2024.
Recent analysis by law firm King & Wood Mallesons shows that hybrid meetings remain the preferred format for ASX 200 companies, adopted in 62 per cent of ASX 200 AGMs in the 2023 AGM season. However, the number of ASX 200 companies holding physical-only AGMs post- COVID has steadily increased and there is relatively limited adoption of fully virtual AGMs in the ASX 200. Feedback from non-listed directors has suggested that virtual and hybrid meetings have increased member participation in AGMs, including in the NFP sector.
The 2022 changes were welcomed by the AICD as important and overdue modernisation of Australia’s corporations law. However, there are limitations in drafting, and stakeholder concerns on these issues. For example, a company may only convene a wholly virtual meeting to the extent it is permitted by the company’s constitution. For many companies this requires shareholder/ member approval to amend the constitution with a special resolution.
Another challenge is ensuring that shareholders and members can participate fully in hybrid and virtual meetings, without excessive moderation of questions. Whether an AGM is held in person only, in person with a livestream, virtual or in a fully hybrid format, all members’ meetings must give members as a whole reasonable opportunity to participate in the meeting.
The AICD has guidance for boards, developed with the Governance Institute, Australasian Investor Relations Association and the Law Council of Australia, with good practice advice on:
- Practical steps to take to manage hybrid and virtual AGMs
- Guidelines on managing questions in virtual and hybrid formats
- Detail on the changes made to document and meeting arrangements by the reforms.
Members can access the AICD’s guide here.
The review is seeking input on how the reforms have impacted running meetings, improvements that could be made to better facilitate the conduct of meetings, and costs and benefits. The AICD welcomes member views on these issues. Please email policy@aicd.com.au
FY25 regulatory priorities
The AICD advocates for balanced, fit-for-purpose and modern regulations that support diligent directors to govern for growth. Our FY25 regulatory priorities are:
- Cyber regulation that supports effective board oversight
- Balanced policy and liability settings that reflect disclosure complexity
- Fit-for-purpose digital regulation that supports sound governance
- Long-term, coordinated policy approaches that strengthen national governance, reduce regulatory complexity and promote economic growth
Senate committee recommends splitting up ASIC
A Senate committee inquiry has argued that the Australian Securities and Investments Commission (ASIC) remit is too broad in an inquiry report tabled in July. The Senate Economics References Committee report calls for the government to “strongly consider separating its functions between a companies regulator and a separate financial authority”. Other recommendations include a review of ASIC’s governance and accountability, more proactive enforcement and financial payments to whistleblowers (per the US SEC).
The committee’s report was not, however, unanimous. The inquiry was chaired by Liberal senator Andrew Bragg. Government senators provided separate “additional comments” arguing that the report simplifies complex evidence and issues. Government senators cited a lack of detail on separating ASIC’s functions as concerns.
Both in this inquiry and in previous reviews, the AICD has argued that changes to ASIC’s governance structure could improve accountability, performance, culture and oversight. We have encouraged consideration of a board structure comprising a majority of non-executive, independent directors.
Of note, in the Financial Services Royal Commission, Commissioner Kenneth Hayne AC KC did not recommend separating ASIC. At the time, the commissioner’s view was that the costs could outweigh the benefits and that the enforcement culture of ASIC should be the focus.
The government is required to respond to inquiries within three months of reports being tabled in the Senate, but is not obliged to adopt committee recommendations.
Canberra delegation
Last month, the AICD hosted our annual Canberra delegation, taking a group of directors to meet with senior political leaders and public servants. More details from Mark Rigotti MAICD here.
Louise Petschler GAICD is General Manager Education & Policy Leadership at AICD.
This article first appeared under the headline 'Meeting Resistance’ in the August 2024 issue of Company Director magazine.
Practice resources — supporting good governance
Examples of the AICD’s contemporary governance practice resources for members:
Directors' best interests duty in practice
- Essential reading on this core director duty, drawing on a landmark legal opinion from Bret Walker AO SC and Gerald Ng MAICD.
AI Governance
- Partnering with the Human Technology Institute at UTS, the AICD’s practical guides provide resources on AI.
Climate Governance
- Prepare for new climate reporting laws with our comprehensive guide.
- Members can also access the AICD’s free climate governance e-learning and short course.
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