Virtual AGMs are coming

Friday, 01 May 2020

John Price photo
John Price
Commissioner, Australian Securities and Investments Commission

    As the end of financial year approaches, ASIC Commissioner John Price discusses the dilemmas of holding annual general meetings during the current climate.

    Shareholder meetings have always been tricky things, famously difficult to get right. In more recent times, they have been highlighted as a natural stalking ground for third-party interests seeking to shine or shed some light on their favoured cause — an issue that vexes many directors, though not all, as well as shareholders.

    Annual general meetings (AGM) are a legal requirement under s 250N of the Corporations Act 2001 (Cth), but for most analysts and governance experts, they are much more. For at least once a year, directors get to be “eyeballed by their owners”— the shareholders. And those same directors have the opportunity to seek the most powerful mandate of all: endorsement of the company’s strategy, its management, plans and performance — their performance.

    It is not required, but the AGM is also a good opportunity for many individual directors who are standing for election or re-election to address the meeting, outlining who they are, what they think and what they might bring to their company.

    All of which makes the COVID-19 pandemic an impossibly difficult scenario for many public companies, which are legally bound to hold their meetings within five months of its financial year. For any year-end (that is, calendar year) institutions, this has meant before 1 June.

    Not all directors might be aware that it has always been possible for any public company to request a time extension should there be “circumstances beyond their control”. It’s fair to say we have one of those before us now.

    The various regulators have redoubled efforts to smooth the path as best we can while companies and consumers try to find a way through these difficult times. For its part, ASIC has put aside its own less time-critical matters so that businesses can focus on the massive challenges ahead over the next six months. Obviously, the law is the law — it will still be enforced and anything endangering consumers is a priority. But ASIC industry reviews, consultation papers and intensive in-house company engagement can be safely and appropriately deferred for the time being.

    Furthermore, where warranted, relief or waivers from regulatory requirements will also be provided. This will include requirements on listed companies associated with secondary capital raisings and audits. Furthermore, ASIC has announced it will take no action should companies need to postpone their AGMs by up to two months — that is, until 31 July 2020.

    The restrictions on crowd sizes and density are extremely relevant for larger companies in particular. It may simply not be feasible for a major listed entity, accustomed to managing thousands of shareholders at a time, to stage an AGM under the current community restrictions.

    Therefore, where viable, companies can hold their AGM as a “virtual AGM” — by some form of online-only means; or a “‘hybrid AGM” — with a physical location, but also with many more attendees “‘streaming in”. In those cases, even where there might be an apparent hurdle in a company’s rules, ASIC is prepared to provide “no action” relief in line with our declared intention of “flexible” pragmatism.

    It is important to note that, where possible and practical, companies can and should proceed with their AGMs and general business as previously scheduled. In some cases, the notice of meeting to shareholders might have already been issued. If so, it would be advisable to let shareholders know of the revised arrangements.

    AGMs are a very important part of the corporate calendar and an aspect of Australia’s corporate environment that is often underestimated. At a time when consumers’ and investors’ faith in institutions might be severely tested — perhaps for reasons out of the control of any of these participants — then that ability to “eyeball the owners”, to endorse their position and strategy, and to provide constructive feedback, is possibly one of the most precious assets that we have.

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