To further aid businesses contending with the impact of the Covid-19 pandemic, the government has decided to extend relief that would allow companies to undertake annual general meetings (AGMs) virtually. Treasurer Josh Frydenberg confirmed that AGMs could continue being held this way until 31 March 2022. It will also allow for sharing of shareholder materials and e-signing of corporate documents electronically.
Listed and unlisted companies are required to hold AGMs and this move will allow them safely meet this obligation. Virtual AGMs have been permitted since 2020 through temporary amendments to the Corporations Act 2001. The reform was allowed to ensure businesses could accommodate social distancing requirements and abide by lockdowns that restricted movement, thereby confining investors and company officials to their homes. The relief has severally been extended since.
Frydenberg further confirmed that the Treasury amendment would now also give the Australian Securities and Investments Commission (ASIC), permanent authority to provide individual or class order regulatory relief for meetings and documents in circumstances beyond the companies’ control. The pandemic being an example of such a situation.
With this change and due to other remarks by the treasurer, it does appear the amendments are likely to be made permanent. Frydenberg added that the government was looking to introduce permanent reforms later in 2021, giving businesses leeway to use technology to facilitate meetings, sign and send documents.
The government has also taken issue with the growing number of costly class-action lawsuits brought about by companies and their officers giving misleading statements or forecasts except where “fault” has been proven. To curb this problem, Frydenberg also announced the easing of continuous disclosure laws for publicly listed companies. He said the changes would mitigate the risk of said companies and officers being subjected to opportunistic class actions and would support them in being able to release forward looking guidance to the market.
The Australian Institute of Company Directors (AICD) managing director Angus Armour echoed support for this move, saying it would aid companies against facing class-action suits and insurance costs. He asserted the reform would make for greater certainty for companies when making disclosures without having to fear speculative class actions challenging their disclosures with the benefit of hindsight.
There is however still some concern by investors and proxy advisers that holding virtual meetings does prevent them from holding officials accountable. The government’s amendments will however allow companies and their directors to be held liable if it is shown they acted with “knowledge, recklessness or negligence” when providing the market with price-sensitive information. ASIC has taken a no-action position on the issue of virtual AGMs.
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