ASIC guidelines for investor meetings using virtual technology
On 20 March 2020, ASIC issued guidelines for meeting upcoming annual general meetings (AGM) and financial reporting requirements. See also media release 20-070MR.
The guidelines discuss ASIC’s ‘no action’ position on non-compliance with provisions of the Corporations Act that may prevent the holding of AGMs via technology that allows members to participate remotely by online or other electronic means (virtual technology).
On 6 May 2020, temporary modifications to the Corporations Act under the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination) took effect1.
These modifications are designed to further facilitate the holding of meetings (including AGMs) via virtual technology by overcoming existing impediments. Among other things, the Determination:
- deems persons participating via virtual technology to be present at the meeting
- confirms virtual technology may be used to provide persons a reasonable opportunity to speak at the meeting
- allows notices of meeting, and other information regarding a meeting, to be provided by including it in an electronic communication, or providing details of an online location where it can be viewed and downloaded.
The modifications extend to provisions of the Corporations Act that give effect to – and enable the enforcement of – company and registered scheme constitutions.
ASIC’s position on virtual technology for investor meetings
ASIC considers that virtual technology is a valuable tool for addressing the challenges of COVID‑19 and to ensure continued investor engagement in meetings. While restrictions on movement and large gatherings remain in place, ASIC strongly encourages companies and responsible entities to hold either:
- ‘virtual’ meetings (a meeting where all members participate via online facilities)
- where circumstances permit, ‘hybrid’ meetings (a small physical meeting linked with online facilities that allow remote participation).
It is important that hybrid or virtual meetings are facilitated and conducted in a way that provides a reasonable opportunity for members to participate (see sections 249S and 252Q of the Corporations Act and paragraph 5(1)(a) of the Determination). This is particularly relevant now as many investors are keen to understand how their company or scheme is responding to the challenges of the current operating environment.
To assist companies and responsible entities to meet these requirements, and ensure that meetings adopting virtual technology are conducted in a meaningful and effective way, we have set out below some guidelines on the calling and holding of hybrid and virtual meetings of members.
ASIC has also commenced a program of observation of hybrid and virtual meetings held during the COVID-19 restrictions. The program is ongoing and we may provide further guidance if warranted based on our continuing observations, any requests for additional guidance we receive, or any change in circumstances.
As our guidance is based in part on the terms of the Determination, it will remain in place until the expiry of the Determination at the end of 5 November 20201, unless it is withdrawn or reissued beforehand.
Given the current restrictions on members’ ability to physically attend meetings, ASIC would be concerned if a company or responsible entity were to seek to hold a physical meeting or a hybrid meeting that did not adequately allow questions to be asked, or votes to be cast, at the meeting in a way that provides a reasonable opportunity for members to effectively participate.
Companies and responsible entities that hold meetings in such circumstances may risk breaching sections 249R or 252P of the Corporations Act (the requirement to hold a meeting at a reasonable time and place), or the terms of the Determination.
Some listed entities may have already called a meeting and not included (or need to change) information in the notice of meeting about the virtual technology that will be used to ensure members have a reasonable opportunity to participate. In such cases the entity should issue a fresh notice containing the new details at least seven days before the meeting (see Determination paragraph 5(3)(b)).
If any listed entities anticipate difficulty in meeting the requirements of the Determination, or our guidance, we encourage them to contact us at the earliest possible opportunity.
Guidelines for conducting hybrid and virtual meetings
These guidelines set out ASIC’s views on the most appropriate approach to conducting hybrid and virtual meetings as well as the legal requirements under the Determination. They apply to public company AGMs and any other meeting of company or scheme members, such as meetings:
- for member approvals required under the Corporations Act or ASX Listing Rules
- to consider a proposed scheme of arrangement.
In these guidelines we refer to virtual technology without specifying any particular kind of technology or requiring the use of a single technology. The most appropriate technology or mix of technologies for a particular meeting will often depend on a variety of factors specific to the company or scheme and its membership. We encourage boards and responsible entities to consider tailored and innovative options in determining the right technologies for their company or scheme meeting.
1. Member participation during hybrid and virtual meetings
As an overall guiding principle, members at a hybrid or virtual meeting should be given an opportunity to participate in the meeting that is equivalent to the one they would have had if attending in person. Having regard to the fundamental elements and purpose of member meetings, this generally means:
- The virtual technology used should enable those participating virtually to follow the proceedings of the meeting uninterrupted.
- Any changes to the way the meeting is conducted to account for the virtual environment should be tailored, as far as possible, to preserve and promote genuine and effective interaction between members and the board or responsible entity.
- Members should be given a reasonable opportunity to ask questions live during the course of the meeting regardless of whether they are participating in person or virtually. This ensures they are able to comment on, and raise questions in response to, presentations, debate and other matters arising at the meeting. At AGMs, a similar opportunity should be extended for questions about, or comments on, the management of the company and (where applicable) the remuneration report, as well as questions to the auditor (see sections 250S, 250SA and 250T of the Corporations Act).
- If virtual technology (or any other process adopted) enables a company or responsible entity to review and select members’ questions or comments submitted in advance of, and/or at, the meeting, the selection process should be balanced and representative. There should also be transparency about the number and nature of the questions asked and not answered – and appropriate records of questions, comments and responses should be kept to enable this.
- Members entitled to vote on resolutions put at the meeting should have the opportunity to consider responses to questions and debate before doing so. This will support members to make a fully informed decision. Members should accordingly have the option to cast a vote live during the meeting via virtual technology in the same way that they would if they attended in person. This is so even where the option to vote prior to the meeting is also available (see also Determination paragraph 5(1)(c)).
2. Voting in a hybrid or virtual meeting
All voting at a virtual or hybrid meeting should be by a poll rather than a show of hands. Voting by a show of hands has the potential to disenfranchise members. This potential is even greater in a virtual setting (see Determination paragraph 5(1)(c)).
Where practicable, voting via online or other means should also be available prior to the meeting for the convenience of members who do not otherwise intend to participate (see Determination paragraph 5(1)(c)).
3. Content of the notice-of-meeting
Many virtual attendees may be using new technology for the first time. The notice-of-meeting should include clear explanations of:
- how to use the technology to observe, vote, make comments and ask questions
- how the reasonable opportunity to vote, comment and ask questions will be provided to those participating virtually.
The explanations should be clear, concise and effective (section s249L(3) of the Corporations Act).
At the very least, companies and responsible entities should specify an email address (or other online submission facility) in the notice of meeting for the service of proxy appointments and proxy appointment authorities.
4. Technical problems during a hybrid or virtual meeting
Technology can be unpredictable and as such, can present new risks to the proper functioning of meetings. Planning ahead can mitigate these risks and improve user experience.
ASIC encourages companies and responsible entities to:
- assess virtual technologies in advance of the meeting. Consider whether the technology adequately facilitates member participation and can handle anticipated usage. Also consider holding a short rehearsal to iron-out potential complications or technical issues.
- consider backup solutions and plans to overcome technical issues. Plan for how you might communicate in real-time to members participating virtually to provide new instructions or a change in plans. Let participants know at the beginning of the meeting how you will communicate these updates if technical issues do arise.
- if technical issues result in a number of members being unable to reasonably participate, the meeting should be adjourned until the problem is fixed. An extension to a statutory timeframe may be required to facilitate this. In the case of AGMs required to be held before 31 May 2020, a company or responsible entity may rely on ASIC’s ‘no action’ position.
Editor’s note: On 31 July 2020 the Government announced that the current arrangements under the Determination would be extended so that they expire on 21 March 2021. ASIC’s guidance will remain in place for so long as the modifications are in effect (unless it is otherwise withdrawn or reissued).