Update 19 August 2021: These new laws came into effect after receiving Royal Assent on 13 August 2021, now allowing companies and registered schemes to undertake electronic execution of documents and hold virtual meetings until 31 March 2022.
In addition to our summary below, the new laws permit the following:
- Companies and registered schemes are able to hold meetings physically, virtually or as a hybrid. For schemes, the ability to do so will be subject to the constitution of the relevant entity but that restriction will not apply to companies.
- Notices of meetings and proxy forms can be given electronically. This may for instance be via email, or alternatively giving the members electronic communication that allows them to access these documents such as downloading them from a link. The hope is that such relief will continue beyond April 2022.
In response to these new laws it is recommended standard processes for sending notices be updated. Moreover the holding of the meeting will require guidance to ensure strict compliance, especially as the use of technology can be difficult regardless of the sophistication of the member. Companies and schemes should take care that the use of technology does not adversely impact a member’s ability to exercise their rights.
Notwithstanding the laws permitting electronic execution, we encourage companies to expressly include clauses providing for electronic execution in their drafting.
Companies will soon be able to undertake electronic execution of documents and hold virtual meetings – at least while the COVID-19 crisis continues.
With restrictions on gatherings continuing to affect the economy, earlier this week the Federal Parliament paved the way for more relief to deal with these practical governance matters more flexibly. As they are still temporary measures however, companies and registered schemes should take this opportunity to fine tune their policies and processes for document execution and virtual meetings and consider introducing more permanent changes to their constitutions to accommodate these changes into the future.
Last year, in response to COVID-19 restrictions, the Federal Government introduced short-term arrangements to allow electronic execution and signing by counterparts, as well as confirmation that general meetings could occur through technology. However, since those temporary measures expired in March 2021, we have been compelled to revert to pre-COVID requirements. ASIC has maintained a no-action position on electronic meetings, but not for electronic execution. However, more permanent relief is on the way.
On 10 August 2021, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 was passed by both houses of Parliament, and expected to become law in the near future after it receives Royal Assent.
The Bill contains a range of provisions which would facilitate the use of technology in meetings, to execute company documents and send meeting-related materials (but with only temporary effect, until 31 March 2022). Many of the changes mirror the measures enacted in 2020 to temporarily alter the operation of the Corporations Act 2001 (Cth) but are more substantive.
The Bill allows companies to sign documents electronically provided they meet certain requirements, such as ensuring each copy includes the entire contents of the document and a method is used to identify the person and indicate their intention to sign the document.
While the Bill does not mandate organisations to use any specific electronic signing method, your organisation may wish to consider investing in software or subscription services such as DocuSign, Adobe Sign or InfoTrack which facilitate secure and reliable execution of documents with your counterparties. These types of software are an important tool to verify the identity of signatories.
Land dealings however can be subjected to additional requirements, as enforced by the land registry in each jurisdiction including a separate obligation to verify identity. Whilst these requirements were relaxed in most cases during COVID-19, you should seek specific advice from a member of our national Property team about the legislation and rules in force relating to land dealings in your state or territory.
The Bill contemplates an ability for companies and registered schemes to hold meetings physically, virtually or as a hybrid. For schemes, the ability to do so will be subject to the constitution of the relevant entity. As has always been the case, meetings using technology will still need to ensure all members have a reasonable opportunity to participate.
Where to now?
Companies with upcoming meetings should carefully consider how the Bill affects them. We encourage companies to thoughtfully plan the timing of those meetings, and understand how technology can be used, and whether their Notices need to be updated accordingly – keeping in mind that this will depend on when the Bill receives Royal Assent. Until the Bill becomes law, organisations must ensure that they continue to work within the existing legal framework under the Corporations Act.
Therefore, at present companies should continue to obtain wet ink signatures for proper execution of documents (or expressly contemplate electronic execution in their drafting). This allows you to rely on assumptions under the Corporations Act. Furthermore, companies should check whether they can presently hold virtual or hybrid meetings under their constitutions.
In order to be best prepared, companies should get an understanding of what requirements must be met in order to hold virtual or hybrid meetings, taking into account what kind of organisation they are such as whether it is a small proprietary company, a publicly listed entity, or a high-member organisation like a registered/licensed club, as each will be subject to different practical requirements. As the legislative changes will expire in April 2022, companies and schemes should consider introducing more permanent changes to your constitutions to accommodate these arrangements into the future.
If you would like assistance with understanding your organisation’s position in light of the proposed new laws or planning any general meetings, please contact a member of our national Corporate team.
David Thomas | Associate | +61 2 9020 5612 | firstname.lastname@example.org