The Corporations Amendment (Meetings and Documents) Bill 2021 (Cth) (Amendment Bill) passed both Houses and received Royal Assent on 22 February 2022, making virtual members’ meetings, electronic communications and the electronic execution of documents permanent features of the Corporations Act 2001 (Cth) (Corporations Act).
The passage of the Amendment Bill brings much needed relief and flexibility to companies in relation to members’ meetings, communications and the execution of documents. In particular, it provides members of companies and registered schemes with a swift transition from current, temporary measures to a more permanent framework.
The document execution amendments commenced on 23 February 2022 (i.e. the day after the Amendment Bill received Royal Assent). The meetings and communication amendments will commence on 1 April 2022.
Key features of the Amendment Bill include:
The Amendment Bill introduces a new Part 1.2AA to the Corporations Act which provides that certain documents may be signed in flexible and “technology neutral” manners. This change applies to:
- the signing of certain documents (including deeds) under section 126 of the Corporations Act (i.e. documents executed by an agent on behalf of a company) or under section 127 of the Corporations Act by a director and company secretary; and
- the signing of documents which relate to certain meetings or resolutions.
Examples of such documents include (but are not limited to):
- notices of meetings of members of a company or registered scheme;
- notices of a resolution to be considered by the directors or members of a company without a meeting; or
- a meeting of the directors of a company (including a meeting of a committee of directors).
It is important to remember that if documents are executed by companies under section 127 of the Corporations Act using technology, certain formalities need to be satisfied. Please refer to our legal alert on electronic execution for more information.
To ensure documents can be signed in a flexible manner, the Amendment Bill makes it clear that the split execution of documents under section 127 of the Corporations Act will be valid. The Amendment Bill does not require that persons:
- sign the same form of the document as another person;
- sign the same page of the document as another person, provided that each person’s copy of that page is identical;
- use the same method to sign the document as another person; or
- sign a document which includes all the information recorded in the document.
For example, a company may execute a document by one director signing a physical copy in wet ink, and another director signing an electronic copy by electronic means.
Section 126 of the Corporations Act is also amended to extend the ability of an agent to execute a document (including a deed), as well as make, vary, ratify or discharge a contract without the need to be appointed by deed. This abrogates the common law rule which requires an agent acting on behalf of a company to be appointed by deed in order for them to execute a deed on behalf of the company. If a company executes a document under section 126 of the Corporations Act, people will be able to rely on the assumptions in subsection 129(3) of the Corporations Act for dealings in relation to the company.
The Amendment Bill also expands the execution mechanisms in section 127 of the Corporations Act to include proprietary companies with a sole director and no company secretary.
Companies, registered schemes and companies registered as bodies corporate under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act) will be able to validly hold both physical and hybrid members’ meetings from 1 April 2022 (as is presently the case under the TLA1 Act). However, wholly virtual meetings will only be permitted if they are expressly required or permitted by the constitution of a company, registered scheme or a company registered as a body corporate under the ACNC Act.
Regardless of the format in which a meeting is conducted, the Amendment Bill mandates that the meeting must give the members as a whole a reasonable opportunity to participate. This includes (but is not limited to):
- holding the meeting at a reasonable time and place;
- using reasonable technology to connect more than one physical venue or to facilitate virtual attendance. For example, the technology used to facilitate virtual attendance would need to be sufficient to allow members to vote; and
- allowing members to exercise any pre-existing right that they may have to ask questions or make comments, both verbally and in writing.
Notably, the Amendment Bill also provides a member, or group of members with at least 5 per cent of the votes, with the ability to require a listed company or registered scheme to appoint an independent person to observe or report on a poll conducted at a meeting.
The Amendment Bill introduces a new regime that covers electronic communication of documents in a new Part in Chapter 1 of the Corporations Act. It allows any meetings-related documents to be provided electronically or in physical form. Examples of such documents include (but are not limited to) notices of meeting, notices of a resolution or minute books. Importantly, a document can only be given electronically if it is reasonable to expect that the document would be readily accessible, so as to be useable for subsequent reference at the time that the document is given.
Documents relating to meetings would also be considered to have been validly signed and given using electronic means, regardless of whether the meeting is a virtual, physical or hybrid meeting.
The Government must review the operation of the provisions relating to meetings and electronic communications within 2 years after the document execution amendments commence.
The provisions relating to virtual meetings must be reviewed by an independent panel. The Government must then table a report on that review in Parliament before the end of a period of 30 months after the document execution amendments commence, otherwise the provisions relating to virtual meetings will cease to have effect. If the provisions cease to have effect, any meetings held during that 30-month period will be valid but meetings cannot continue to be held in accordance with the new provisions that facilitate the use of virtual meeting technology.
The Government has introduced a further tranche of amendments to the Corporations Act in the Treasury Laws Amendment (Modernising Business Communications) Bill 2022 which was recently introduced in the House of Representatives on 17 February 2022.
We will be watching these developments closely.