In March 2020, the Federal Government introduced a series of temporary reforms to enable businesses to operate virtually during the pandemic. The changes included provisions allowing virtual AGMs, electronic execution, delayed financial reporting and ASX relief for annual listing fees, which we reported in our article on Corporate Reform in the Age of COVID-19. These changes expired on 21 March 2021 and the laws reverted to their original position before the pandemic.
In response to Australia’s ongoing lockdowns, the Corporations Act 2001 (Cth) (‘Act’) has been further amended by the Treasury Laws Amendment (2021 Measures No.1) Act 2021 (Cth) (‘Amendment Act)’. The Amendment Act came into effect on 14 August this year and reinstates many of the original reforms. The temporary reforms do not apply retrospectively, meaning companies cannot rely on the amendments to validate corporate actions in the period from 21 March to 14 August 2021.
These amendments are set to expire on 1 April 2022. However, the Federal Government has indicated it will enact permanent reforms allowing electronic and split execution under section 127 of the Act prior to this date.
The new, temporary reforms enable corporations to:
These changes are intended to assist companies struggling to carry out their usual business practices under the lockdown. These changes broadly reflect those made last year, which have since expired.
The new amendments are due to automatically expire on 1 April 2022. However, the Federal Government has stated that it intends to enact permanent reforms allowing electronic and split execution under section 127 of the Act before the temporary reforms lapse.
Once again, companies can electronically execute documents under section 127 of the Act provided that the following 3 requirements are met:
These requirements extend to all documents that can be executed under section 127, including deeds. They are satisfied using the following process:
The Act also permits ‘split execution’ in place of the traditional requirement that each signatory must sign a single, physical document. Companies are therefore allowed to bind themselves by having two signatories sign two different copies or counterparts of the same document. These copies can be digital, physical or a combination of both.
The amendments allow meetings of directors and shareholders of companies, and members of registered schemes, to be held virtually. Meetings may be held as a hybrid in-person and virtual meeting, or as a wholly virtual meeting. This is a particularly critical reform in light of the impending 2021 AGM season.
The technology used to carry out the virtual meeting must provide attendees with a reasonable opportunity to participate in the meeting without being physically present. Video conferencing platforms such as Zoom, Skype and Microsoft Teams would meet this requirement.
This provision applies regardless of whether virtual meetings are provided for in a company’s constitution. However, if a company wishes to continue holding virtual meetings after the sunset date on 1 April 2022, it is advisable to amend the Constitution accordingly.
Documents Related to Meetings
Companies may now electronically sign and issue any document that relates to a meeting, including notices of meeting, notices of resolution, proxy documents, minute books and members’ resolutions.
These documents can be issued electronically, or by sending mail that contains information of where to access the documents. The Amendment Act also allows these documents to be recorded and stored electronically, as long as they are accessible for later reference.
If a member still wishes to receive physical copies of meeting-related documents, they can request this from the company.
The Amendment Act provides a number of reforms to the Corporations Act in response to the second wave of COVID-19 lockdowns in Australia. These changes provide greater flexibility for companies during these challenging times for business. If you require corporate legal advice with respect to the temporary reforms or more generally, please contact us below. We can quickly assess your situation and make immediate and cost-effective recommendations.