Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)10. Chapter 2G: Meetings
10.1 Company meeting rules are now located primarily in Part 3.3 of the Law and Table A. Parts 2G.1 to 2G.3 of Chapter 2G replace these rules and bring together all of the provisions on meetings to make them more accessible and easier to follow. Where necessary, the rules have been updated to make them consistent with current practices. The consolidation of the rules has also removed duplication between Part 3.3 and Table A.
10.2 A company may currently rely on the meetings rules in Table A or determine its own rules through its constitution. The Bill retains this flexibility by including replaceable rules which deal with meetings in Parts 2G.1 and 2G.2. A company may remove or substitute these rules, which are identified in the provisions heading (Bill s 135). The rules are binding in the same way as a contract.
10.3 Although the Bill will repeal Table A, the articles of existing companies will not be affected, even where they consist of the old Table A rules (Bill s 1415). However, an existing company will be able to repeal its constitution to adopt the Chapter 2G rules (Bill s 135(1)(a)(ii)).
10.4 Rules for meetings of members of collective investment schemes are set out in Part 2G.4 of Chapter 2G. To the maximum extent appropriate, the provisions are based on those for public companies.
Directors meetings
10.5 Division 2 of Part 2G.1 will set out the core rules necessary to hold a directors meeting (Bill ss 248C - 248G).
10.6 There will be a replaceable rule that any director can call a directors meeting (Bill s 248C).
10.7 Each director will need to be given reasonable notice of a directors meeting to make sure that they are aware of the meeting (Bill s 248C). This rule is more flexible than that for company meetings, in that it is replaceable and does not require written notice. This is because the number of directors is usually smaller and the potential detriment of less onerous rules is unlikely to be significant. An accidental omission to give notice will not usually invalidate the meeting (current ss 1322 (3) and (6)).
10.8 The Bill will allow a directors meeting to be called or held using any technology consented to by all the directors (Bill s 248D). A meeting held using technology allows directors to conduct business, pass resolutions and agree on management directions in the same way as a normal meeting. It will no longer be necessary for a companys constitution to specify that a technology can be used for a directors meeting. Directors will be able to veto the use of a particular technology by withdrawing their consent within a reasonable time before the meeting. This ensures directors have agreed to use a particular technology but prevents directors threatening to withdraw their consent during the meeting. If the company wishes, it will be able to have a constitution restricting the use of technology to hold meetings or specifying acceptable technologies.
10.9 A quorum of 2 directors will be required to be present throughout the meeting. This rule will be replaceable and will also be able to be modified by the directors (Bill s 248F).
10.10 There will be a replaceable rule governing the appointment and termination of alternate directors and the rights and powers of alternate directors (Bill Schedule 2 Item 171). The Bill refers to the appointment of an alternate for a specified period. The period could be calculated by reference to the duration or occurrence of an event (for example, while I am on holidays).
Meetings of members of companies
Members decisions without meetings
10.11 The First Corporate Law Simplification Act 1995 extended the circulating resolution procedure to all proprietary companies. The Bill will build on this by extending the circulating resolution procedure to all special and ordinary resolutions passed by proprietary companies, except a resolution to remove an auditor under section 329 (Bill s 249A(1)). This exception is designed to ensure that auditors are given an opportunity to present their case personally to the members (current s 329(4)). The circulating resolution procedure will have particular relevance in the share capital provisions of the Bill, for example to enable circulating resolutions to be used for shareholder resolutions in relation to share buy-backs, approval of employee share schemes for the purposes of the provisions on self-acquisition of shares, and financial assistance.
10.12 A circulating resolution will be able to be distributed using any means that allows a person to sign the resolution and receive any accompanying documents (Bill ss 249A(2) and 249A(3)). The resolution will be passed when the last person signs the document, regardless of whether the document is circulated by fax or other means (Bill ss 248A(3) and 249A(4)).
10.13 Any document that would otherwise have been given to members if the resolution were being proposed at a general meeting will need to be circulated with the circulating minute (Bill s 249A(5)(a)). This is intended to ensure that members will not be disadvantaged by the circulating minute procedure. Requirements in the Law to lodge notices of meeting or documents to accompany the notice will be satisfied by lodging with the ASC the document to be signed by members or the accompanying documents (Bill ss 249A(5)(b) and (c)). This will ensure that the ASC receives the information, which will then be available to interested parties through the ASC Alert system.
10.14 Given that 1 person cannot conduct a meeting, companies with 1 member will be able to pass a resolution by the member recording the resolution and signing the record (Bill s 249B(1)). This procedure will allow 1 member companies to do things for which a meeting would otherwise be required.
10.15 The Bill will make it clear that this procedure may be used to pass a special resolution by deleting the current definition of resolution which excludes special resolutions (Bill Schedule 2 Item 166). This will mean that resolution will have its ordinary meaning and include both ordinary and special resolutions.
10.16 To ensure that the relevant information will be publicly available, a requirement in the Law to lodge with the ASC information or a document relating to the resolution will be satisfied by lodging the information or document with the resolution that is passed (Bill s 249B(2)).
Who may call meetings of members
10.17 The Bill will repeal the existing rule allowing 100 members who have each paid up an average of $200 on their shares to request a general meeting (current s 246(1)(a)). The current higher threshold of 200 members for companies without share capital will also be removed (current s 246(1)(b)). Instead, directors will be required to call a general meeting if requested to do so by at least 100 members entitled to vote (Bill s 249D(1)(b)).
10.18 As at present, a member or members holding at least 5% of the votes that may be cast at the meeting will be able to require the directors to call a general meeting (Bill s 249D(1)(a)). Although the provision refers to members, it is intended that a single member who holds 5% of the votes will be able to request a general meeting.
10.19 The percentage of votes will be calculated as at the midnight before the request is given to the company, providing greater certainty for members in determining whether they have sufficient numbers (Bill s 249D(4)).
10.20 Currently, the directors must convene the general meeting as soon as practicable, but no later than 2 months after receiving the request. The Bill will require the directors to call the meeting within 21 days after the request is given to the company and to hold the meeting within 2 months, ensuring that the meeting is called and held within a reasonable time (Bill s 249D(5)). The current procedural requirements for the request will be retained (Bill ss 249D(2) and (3)).
10.21 If the meeting is not called within 21 days of the members request, the Bill will retain the existing right of the requesting members to themselves call and hold the meeting (Bill s 249E).
10.22 Members of a company will have an independent power to call members meetings. A company will no longer be able to displace its members right to call a general meeting themselves by adopting a contrary provision in the constitution (Bill s 249F). This could also be useful if there are no directors to call meetings or if a companys constitution does not allow a director to call a meeting (Bill s 249C), as the alternative court procedure is relatively costly and time consuming (Bill s 249G).
10.23 The company generally pays the cost of calling and holding meetings. However, as at present, where the directors fail to call a meeting, the members can recover the costs of calling and arranging the meeting from the company, which is entitled to be reimbursed by the directors (Bill s 249E(5)). A director will not be liable to reimburse the company if they prove they took all reasonable steps to cause the directors to call the meeting as requested by members. The Bill makes it clear that if the members call a meeting themselves, they will be required to pay the expense of calling and holding the meeting (Bill s 249F(1)).
10.24 The Bill includes a requirement that members meetings be held at a reasonable time and place (Bill s 249R) and for a proper purpose (Bill s 249Q). These rules are designed to protect shareholders and directors by preventing general meetings being called at times and places that are unreasonably inconvenient for them and by preventing meetings being called for improper purposes.
10.25 As a transitional measure, meetings called before the Bill commences will generally be required to be called and held in accordance with the new meetings rules, except for the notice period (Bill s 1424).
10.26 A company will be required to give at least 21 days notice of all members meetings (Bill s 249H(1)). This will give members and persons holding shares on behalf of the beneficial owners more time to prepare for a meeting. The current law requires at least 21 days notice of a meeting to consider a special resolution, and at least 14 days notice for other meetings or longer periods if required in a companys constitution (current ss 247(2) and 253(1)(a)). It has been suggested by shareholder and investor bodies that 14 days is insufficient notice of a meeting, particularly where the company has institutional or overseas shareholders.
10.27 For general meetings other than AGMs, members holding at least 95% of the votes will be able to agree to shorter notice (Bill s 249H(2)(b)). The requirement for short notice to be agreed to by a majority of the members will be repealed, to provide greater flexibility for those members holding the vast majority of votes (current s 247(3)(b)). As at present, an AGM will only be able to be held on shorter notice if all the members entitled to vote agree (Bill s 249H(2)(a)). Members will be able to consent to short notice immediately before a meeting commences.
10.28 Shorter notice will not be available for meetings involving resolutions to remove an auditor and public company resolutions to remove or replace a director, ensuring that the auditor or director has sufficient time to respond to the resolution (Bill ss 249H(3) and (4)). Members will be required to give the company notice of their intention to move the resolution before the meeting to consider the resolution is called (Bill Schedule 2 Items 172 and 181). As at present, the directors will be required to call the meeting within 2 months after the members request (Bill s 249D(5)).
10.29 If a meeting is not specifically called, a resolution to remove an auditor or a public company resolution to remove or replace a director will be considered at the next general meeting that occurs more than 2 months after the members give notice of the resolution to the company (Bill Schedule 2 Items 172 and 181).
Notice to members and directors
10.30 Notice of a members meeting will be required to be given individually to every member entitled to vote and to every director (Bill s 249J(1)). This change recognises the importance of members receiving direct notice of meetings in order to be able to exercise their rights. The rule will not be able to be displaced by a companys constitution, unlike under the current law (current s 247(4)).
10.31 To avoid unnecessary duplication, a company need only send 1 notice to joint shareholders (Bill s 249J(1)). Under the replaceable rules, notices must be sent to the joint member named first in the members register, unless a companys constitution provides otherwise (Bill s 249J(2)). An accidental omission to give notice to a member will not usually invalidate the meeting (current ss 1322 (3) and (6)).
10.32 The Bill will allow companies to give members notice of a meeting personally or by post as is currently allowed in Table A (Bill s 249J(3)(a) and (b)). It will also allow companies to send notice of a meeting by fax or electronically if a member nominates a fax number or electronic address (Bill s 249J(3)(c)). The company will also be able to use any other means of giving notice permitted in its constitution (Bill s 249J(3)(d)).
10.33 A replaceable rule provides that notices sent by post will be taken to be given 3 days after they are sent and that notices sent by fax or electronically will be taken to be given on the business day after they are sent (Bill s 249J(4)). These time periods are consistent with those generally adopted in current practice. However, a company will be able to replace them if they wish to adopt different time periods.
10.34 Under the Bill, a notice of a members meeting must include certain minimum information such as when, where and how the meeting is to be held, the general nature of the business to be considered at the meeting and, if the member is entitled to appoint a proxy, certain details concerning the appointment of proxies (Bill s 249L). The Bill differs from the current position in that this information is mandatory and will ensure that the notice gives members the essential information they need to allow them to participate in the meeting (current s 250(5) and Table A r 41(1)). This provision does not affect the disclosures that must be made to members under common law principles.
10.35 Currently, if it is proposed to pass a special resolution, the notice of the meeting must specify that it is intended to pass the resolution as a special resolution (current s 253(1)(a)). The Bill reflects the current practice that the notice also state the resolution to ensure that members are fully informed before being asked to vote (Bill s 249L(c) and Schedule 2 Item 166).
Members rights to put resolutions etc. at general meetings
10.36 Members can currently require the company to put a resolution on the agenda for the next AGM, or circulate a statement about a matter to be considered at the meeting (current s 252). The Bill extends this right to all general meetings (Bill ss 249N - 249P). As in the case of the thresholds for members requesting meetings under section 249D of the Bill, the threshold for members seeking to take advantage of this procedure will be 100 members or members who hold 5% of the votes (Bill ss 249N(1) and 249P(2)). Similarly, the percentage of votes will be calculated as at the midnight before the request, providing greater certainty for members in determining whether they have sufficient numbers (Bill ss 249N(4) and 249P(5)). The procedural requirements for the request will be based on those for members requesting meetings (Bill ss 249D(2) - (4), 249N(2) - (4) and 249P(3) - (5)).
10.37 Currently, the request for a members resolution must be given to the company at least 6 weeks before the meeting (current s 252(5)(a)). The Bill will require the resolution to be considered at the first general meeting held at least 2 months after the members request is served (Bill s 249O(1)). This will give the company more time to comply with its obligations, particularly given the requirement for at least 21 days notice of the meeting.
10.38 The company will be required to pay for the distribution of a resolution or statement if it is received in time to send it out with the notice of the general meeting (Bill ss 249O(3) and 249P(7)). Otherwise, the requesting members will be jointly and individually liable to pay the expenses reasonably incurred in giving notice of the resolution or distributing the statement (Bill ss 249O(4) and 249P(8)). The use of individually in the expression jointly and individually liable reflects modern usage and it is intended that the expression have the same effect as joint and several liability.
10.39 Where the resolution or statement can be included with the notice of meeting, there should be little incremental expense to the company in complying with the request. If these costs were borne by a member, they could be a significant disincentive for members wishing to propose a resolution or distribute a statement. On the other hand, if the company were not otherwise sending out notices of a meeting, it is considered appropriate that the relevant members bear the cost.
10.40 A resolution or statement does not have to be circulated if it is more than 1,000 words long, defamatory or, if the requesting members are to bear the expenses, not accompanied by a payment reasonably sufficient to meet the expense of circulating the resolution or statement (Bill ss 249O(5) and 249P(9)). Under the new rules, a statement may be provided for each matter to be considered at the meeting and for any other matter that may be properly considered. If the meeting is an AGM, the statement may relate to the management of the company or the conduct of the audit and the preparation of the auditors report.
Holding meetings using technology
10.41 The Bill will allow a company to hold its meetings using technology, such as video-links, without the need for specific rules in a constitution (Bill s 249S).
10.42 The existing case law is uncertain concerning the extent to which technology can be used to conduct meetings when all those attending are not at the same place and there is no specific authorisation in the companys constitution. Based on the current Table A subregulation 69(1) provision that directors may meet together for the dispatch of business, some courts have held that directors must physically meet together to conduct business unless the companys articles authorise other means of holding the meeting, such as telephone conferences:
Magnacrete Ltd v Douglas-Hill
(1989)
48 SASR 565
;
Southern Resources Ltd v Residues Treatment and Trading Co Ltd
(1990)
8 ACLC 1
,151. More recently, courts have held that a meeting does not require all participants to be in the same place:
Bell v Burton
(1993)
12 ACSR 325
;
Wagner v International Health Promotions
(1994)
15 ACSR 419
;
Re Giga Investments Pty Ltd
(1995)
13 ACLC 1
,047. However, it has been considered that the technology must allow all the participants to take part in the meeting:
Byng v London Life Association Ltd
(1990) Ch 170;
Re Giga Investments Pty Ltd
(1995)
13 ACLC 1
,047.
10.43 The Bill will make it clear that companies will be able to take advantage of technology in holding members meetings at different places so long as the members as a whole have a reasonable opportunity to participate in the meeting (Bill s 249S). This does not require that each individual member have an opportunity to participate. For most companies, a reasonable opportunity to participate would mean that each member is able to communicate with the chairman and be heard by other members attending the meeting, including those at the other venues. However, whether there has been a reasonable opportunity will depend upon the circumstances of the meeting. Companies may also choose to have a constitution restricting the use of technology to hold meetings or specifying acceptable technologies.
10.44 If a company uses technology to hold its meetings in more than 1 place, it will need to take into account factors such as:
- (a)
- the ability of the chairman to conduct and control the proceedings
- (b)
- the number of persons attending the meeting
- (c)
- the nature of the business of the meeting (for example, it may include a visual presentation)
- (d)
- the voting processes available (for example, it will be necessary to have procedures in place to count members votes from all venues)
- (e)
- whether persons at the meeting can communicate with the chairman and follow the proceedings.
10.45 If the technology fails part way through the meeting, the meeting or that part of the meeting affected by the technology failure will be valid unless:
- (a)
- a member does not have a reasonable opportunity to participate, and
- (b)
- the Court declares the meeting invalid on the grounds that a substantial injustice has or may be caused which cannot be remedied by another order (Bill Schedule 2 Item 191).
10.46 The Bill includes a replaceable rule that the quorum for a members meeting will be 2 for both proprietary and public companies (Bill s 249T(1)). This differs from the current law, which requires a quorum of 3 members for a public company unless its constitution provides otherwise (current s 249(1)(a)). The replaceable rule reflects the reduction of the minimum number of public company members from 5 to 1 (Bill s 114), and that 1 member companies cannot hold meetings.
10.47 Table A currently provides that the quorum must be present when the meeting commences its business (current Table A r 42(1)). Under the replaceable rule, the quorum will need to be present during the whole of the meeting to ensure that any decisions are made by at least 2 members (Bill s 249T(1)).
10.48 Where the meeting is being held at more than 1 venue using technology, persons present at each of those venues may be counted towards the quorum. As at present, there will be a replaceable rule that persons attending as proxies or body corporate representatives will count towards the quorum. This rule will be qualified to avoid double counting of proxies or body corporate representatives. Each individual will be counted only once towards the quorum, even if they are there in more than 1 capacity. In addition, a member will not be able to constitute a meeting by sending more than 1 proxy or representative (Bill s 249T(2)).
10.49 A members meeting, including a meeting requested by members, will be adjourned if a quorum is not present within 30 minutes of the time specified in the notice for the start of the meeting. Where the directors do not specify the date, time or place for the resumption of the meeting, the default provisions in the Bill will provide certainty (Bill s 249T(3)). However, the meeting will be dissolved if there is no quorum within 30 minutes after the meeting is set to resume (Bill s 249T(4)).
10.50 The current Table A rule is that the chairman of a members meeting is the chairman of directors meetings. If no such person is elected or the person is not present within 15 minutes, the chairman may be elected by the members (current Table A r 44).
10.51 Under the replaceable rules in the Bill, the directors will have the opportunity to elect any individual to chair meetings (Bill s 249U(1)). This will give the directors the opportunity to appoint an independent person to be the chairman of members meetings. If they do not elect someone beforehand, or the elected person is not available for the whole or a part of the meeting, the directors will be required to elect an individual present at the meeting (Bill s 249U(2)). The members will only need to elect the chairman if the directors have not elected someone or the elected person is not available for the whole or a part of the meeting (Bill s 249U(3)).
10.52 The proxy provisions will be streamlined to make it easier to appoint a proxy and less likely that the appointment will be invalid.
10.53 As under the current law, a member of a public company will be able to appoint a proxy. Members of a proprietary company will also be able to appoint a proxy. However, proprietary companies will be able to displace the rule, because closely-held proprietary companies may wish to allow only members to be present at meetings and vote in person (Bill s 249X(1)).
Apportioning votes between 1 or 2 proxies
10.54 Members who are able to appoint proxies will have greater flexibility in the way they apportion their votes. Members with 2 or more votes will be able to appoint 2 proxies, irrespective of whether the company has a share capital, to make it easier for members to exercise their votes differently (Bill s 249X(3)). Under the current law, members of companies without share capital are restricted to 1 proxy (current s 250(1)(a)).
10.55 For all appointments, members will be able to specify either the number or the proportion of their votes that the proxy may exercise. Currently, an appointment of 2 proxies is effective if each proxy is appointed to exercise a specified proportion of the members voting rights (current s 250(3)). The Bill will avoid a member being disenfranchised where they do not specify the proportion of votes that the 2 proxies are to exercise, by allowing both proxies to exercise half of the votes. It will be made clear that fractions of votes cannot be exercised (Bill ss 249X(2) - (4)).
10.56 A proxy will have the same rights as the member to speak, vote and join in the demand for a poll at the meeting, subject to the appointment (Bill s 249Y(1)). A proxy will also be able to vote on a show of hands unless the constitution provides otherwise (Bill s 249Y(2)). This differs from the current law which requires the companys constitution to specifically give the proxy that right (current s 250(2)). The proxys appointment will be able to direct the proxy how to vote or impose restrictions on the exercise of the vote.
10.57 Unless the companys constitution provides otherwise, when a member who has given a proxy attends a meeting, the proxys right to speak and vote at the meeting will be temporarily suspended while the member is present. This could be useful where the member has made a standing appointment or an appointment that applies to a number of meetings, and subsequently decides to personally attend and vote during part or all of some of those meetings. Alternatively, the company constitution can establish a different rule for when a member is present such as allowing the member to vote and the proxy to speak on behalf of the member.
10.58 If a member cannot vote on a resolution in their own capacity, for example due to a conflict of interest, they will nevertheless be able to vote as a proxy for another member if the appointment requires them to vote in a certain way and they vote that way on the resolution (Bill s 250C(1)).
Lists of proxies and proxy appointment forms
10.59 If a company sends a list of persons willing to act as proxies or a proxy appointment form to a member on its own initiative, the list or form will be required to be sent to all members entitled to appoint a proxy. Similarly, a company will be able to provide such a list or form to a member on request if it makes the list or form available to any other member who requests it (Bill s 249Z). This prevents 1 or more members being disadvantaged by not having the same access to proxies and appointment forms as the other members.
10.60 A proxy appointment will be valid if it is signed by the member and contains certain minimum information (Bill s 250A(1)). Under the usual principles of agency, a member will be able to arrange for a proxy to be signed on their behalf by an agent or by a person acting under a power of attorney (Bill Schedule 2 Item 169).
10.61 A company will continue to be able to provide a proxy form which suits their needs, for example, by using a bar code to facilitate the sorting of forms. However, an appointment will be valid if the minimum information is provided, whether or not the appointment is made using a form provided by the company.
10.62 The new proxy rules will also make it clear that:
- (a)
- proxies may be given standing appointments or be appointed for more than 1 meeting (Bill s 250A(1))
- (b)
- appointments where the signature has not been dated or witnessed are valid (Bill ss 250A(3) and (6)).
10.63 If a member appoints a proxy after already appointing one, a later appointment will revoke the earlier appointment if both appointments could not be validly exercised at the meeting (Bill s 250A(7)). This will make it clear that members can appoint a second proxy at any time after the first appointment, so long as the subsequent appointment does not effectively replace the first one.
10.64 Currently, if a proxy votes, they would be required to follow any directions in the appointment (current Table A r 54(2)). Any failure to exercise a vote would be a contractual issue. Under the Bill, if a proxy votes contrary to directions in their appointment, they will commit an offence if they were held out by the company to be a person who could act as a proxy (Bill s 250A(5)).
10.65 Under the Bill, if the chairman is a proxy and is directed to vote in a specific way, they will be required to vote as directed on a poll (Bill s 250A(4)(c)). This reflects the significant influence that a chairman has over procedural matters in a meeting and, as they often hold many proxies on behalf of members, their capacity to affect substantive resolutions. Other proxies will not be required to vote on a poll, but if they do, they must vote as directed (Bill s 250A(4)(d)). If a member is appointed to vote a particular way as a proxy it will not affect their right to vote as a member (Bill s 250A(4)).
10.66 The Bill does not require a proxy to vote on a show of hands (Bill s 250A(4)(a)). They will be unable to vote on a show of hands if they have been directed to vote in 2 different ways (Bill s 250A(4)(b)). As the chairman often holds proxies for and against a resolution, this will prevent them from voting on a show of hands given that each person generally has only 1 vote.
Giving proxy documents to company
10.67 A member will be able to give or fax a proxy to the companys registered office or any other place specified in the notice of meeting. A member will also be able to lodge proxy documents electronically if the company specifies an electronic address in the notice of meeting (Bill s 250B(3)).
10.68 Given the nature of electronic transmission, it will not be necessary for the appointment to be signed. However, in the notice of meeting a company may specify that transmission by fax or to an electronic address must be verified and that the proxy must produce the original proxy documents at the meeting. The appointment of the proxy will be ineffective where these requirements exist and have not been satisfied (Bill s 250B(4)).
10.69 As at present, members will be required to give the proxy documents to the company at least 48 hours before the meeting or the adjourned part of the meeting (Bill ss 250B(1) and (2)). This time period facilitates the use of proxies by members. Although the 48 hours does not exclude weekends or holidays, meetings are almost always called by the directors and they will be able to select a convenient meeting day in light of this requirement. A company will be able to give its members more time to give it the proxy documents, by reducing the time period in its constitution or the notice of meeting (Bill s 250B(5)). This change will give companies additional flexibility in the way they handle proxy appointments.
Body corporate representatives
10.70 A company will have greater flexibility in appointing representatives (Bill s 250D). A company will be able to identify its representative by reference to an office, avoiding the cost of making another appointment if a specified person is not available (Bill s 250D(2)). In addition, it will be clear that a company will be able to make a standing appointment for all meetings which it could attend as a member (Bill s 250D(1)). The appointment will be able to restrict the representatives powers, such as preventing them from voting on a resolution without a meeting (Bill s 250D(2)). Otherwise, the representative will have all the powers that the body corporate has as a member (Bill s 250D(4)). All appointments will be revocable (current s 109ZB(8)).
10.71 There are currently rules on demanding a poll in both the Law and Table A (current s 248(1)(b) and Table A r 46(1)). The Bill removes this overlap (Bill s 250L).
10.72 To be valid, a special resolution will need to be set out in the notice of meeting (Bill s 249L). Special resolutions will usually be lodged with the ASC within 14 days after they are passed, instead of a month as at present (Bill Schedule 2 Items 179, 184, 186, 187 and 188). Due to their significant impact on the rights of members or creditors, special resolutions to vary or cancel class rights will need to be lodged within 7 days (Bill s 246B(3)).
10.73 The Table A rules currently accommodate the exercise of voting rights by an attorney (for example, current Table A regulations 49 and 50). As powers of attorney are used for many purposes in addition to meetings, it is more appropriate that the rules relating to them be left to the common law. However, where a members attorney appoints a proxy, the power of attorney will need to be lodged with the proxy so that the company can be certain that the appointment is valid (Bill s 250B(1)(b)).
Annual general meetings of public companies
10.74 The current requirements for a public company to hold an AGM will be retained (Bill ss 250N and 250P). These rules are designed to give companies flexibility as to when to hold their AGM and when to end their financial year. For a newly formed company there is a separate requirement for the company to hold its first AGM as well as the normal requirement to hold regular AGMs. However, one meeting may be held at a time which will satisfy both requirements (Bill s 250N(1) and (2)). It will be made clear that a 1 member public company cannot hold an AGM (Bill s 250N(4)). Due to their recurrent nature, certain matters may be included in the business of an AGM without being referred to in the notice of meeting (Bill s 250R).
10.75 As a matter of common practice, members are given an opportunity to ask questions at the AGM about the management of their company. The Bill recognises the importance of this practice by requiring the chairman to allow members as a whole a reasonable opportunity to ask questions about, or comment on, the companys management (Bill s 250S). This amendment is based on similar provisions in the companies legislation in Ontario and New Zealand.
10.76 The Bill will also give the members as a whole a reasonable opportunity to ask the auditor or their representative, if present at the AGM, questions relevant to the audit report (Bill s 250T). The Bill makes it clear that this does not require the auditor (or a representative) to be present at the meeting. The right of the auditor or their representative to attend and speak at general meetings will not be affected (Bill s 249V). If answering questions in relation to the audit report an auditor will be protected by qualified privilege as they are acting in the course of their duties (current s 1289).
10.77 Sections 250S and 250T only place an obligation on the chairman to provide a reasonable opportunity for members to ask questions. There is no corresponding legal obligation on the directors or auditor to answer questions. Such an obligation would be both inappropriate and impractical.
10.78 What is a reasonable opportunity will depend upon the circumstances of the meeting. These provisions will not affect the chairpersons power under the common law to run an orderly meeting. In particular, the chairman will not necessarily be required to allow each member who wishes to do so an opportunity to ask questions. The Bill includes the words as a whole to confirm that each individual does not have the right to ask a question. The chairman will be able to move on to the next item on the agenda when they consider that there has been a reasonable time for questions, taking into account all the circumstances of the meeting.
10.79 The Law will no longer require a company to hold a statutory meeting or send its members a statutory report following the issue of shares under its first prospectus. This requirement has been overtaken by the continuous disclosure obligations, which are designed to protect the interests of shareholders by making available, either through the Australian Stock Exchange or the ASC, information which would be expected to materially affect the value of their shares.
10.80 The remaining rules have been rewritten without material change (Bill ss 248B, 249K, 249W(2), 250H, 250K. Similarly, a number of the Table A rules have been brought into the Law as replaceable rules without material change (Bill ss 248A, 248E, 248G, 249M, 249W(1), 250E, 250F, 250G, 250J, 250K and 250M).
Minutes and members access to minutes
10.81 As at present, all proceedings of members and directors meetings will be required to be recorded in the companys minute books within 1 month (Bill ss 251A(1)(a) and (b)). Resolutions passed without a meeting (including those passed by the only member or director of a company) and declarations of the only director of a proprietary company will also be subject to this requirement, making the minute obligations consistent for all resolutions (Bill ss 251A(1)(c) - (e)). The current rules on where the minute books must be kept will be retained (Bill s 251A(5)).
10.82 All minutes will be required to be signed within a reasonable time to ensure that a verified record is available as soon as practicable (Bill ss 251A(2) - (4)). Minutes of meetings will be able to be signed by the chairman of the meeting or the chairman of the next meeting (Bill s 251A(2)). Minutes of resolutions without meetings, and declarations of single director proprietary companies, will have to be signed by a director (Bill ss 251A(3) and (4)). Unless the contrary is proved, a minute that is recorded and signed as required is evidence of the relevant proceeding, resolution or declaration (Bill s 251A(6)).
10.83 Members will have access without charge to minutes of resolutions passed at a general meeting, including resolutions passed using the circulating resolution procedure (Bill ss 251B(1)). A copy of these minutes, or an extract from the minutes of a meeting, will also be available on written request (Bill ss 251B(2) - (4)).
Meetings of members of registered managed investment schemes
10.84 The provisions in Part 2G.4 of Chapter 2G are designed to clarify and enhance the rights of investors in managed investment schemes. Most of the provisions are based on those applicable to meetings of public companies. The existing provisions in Part 7.12 Division 5 and 5A and the related regulations will be repealed.
10.85 The proposed provisions will regulate important aspects of managed investment meetings. It is envisaged that the provisions in the Law be able to be supplemented by provisions in the scheme constitution to the extent that they are not inconsistent with the Law.
10.86 Unlike the rules applying to public companies, managed investment schemes will not be required to hold annual general meetings. This is consistent with the usual character of collective investment schemes as passive investment vehicles.
Meetings initiated by the responsible entity
10.87 The Bill will enable the responsible entity to call meetings of scheme members (Bill s 252A). The Law does not limit the purpose for which these meetings may be called. The responsible entity may call meetings for a purpose envisaged by the Law or set out in the schemes constitution or for any other matter.
10.88 Members of registered schemes will be able to request the responsible entity to call meetings for the purpose of considering proposed special or extraordinary resolutions (Bill s 252B). Provisions in the Managed Investments Bill 1997 provide that resolutions of this kind are necessary for certain important purposes. In particular:
- (a)
- a special resolution will be required to amend the scheme constitution
- (b)
- an extraordinary resolution will be required to either:
- -
- replace the responsible entity, or
- -
- terminate the scheme.
10.89 Consistent with the approach taken in relation to members requests for company meetings, a request will need to be made by the holders of at least 5% of the votes or at least 100 members (Bill s 252B(1)).
10.90 When members request a meeting, they will be required to set out the heading of the proposed resolution (Bill s 252B). Members will also be able to provide a supporting statement, not exceeding 1,000 words (Bill ss 252B(3) and (8)). The responsible entity will be required to circulate the resolution and statement with the notice of meeting, or as soon as practicable afterwards (Bill s 252B(7)). The cost of calling and holding such meetings will be borne by the scheme (Bill s 252B(9)).
10.91 If the responsible entity fails to comply with a request to call a meeting, the members will be able to call and hold the meeting themselves (Bill s 252C). In these circumstances, the responsible entity will be liable for the reasonable cost of calling and holding the members meeting (Bill s 252C(4)).
10.92 Members holding at least 5% of the votes will also be able to call and hold a meeting to consider and vote on a proposed special or extraordinary resolution at their own cost (Bill s 252D).
10.93 The Court will be empowered to call a meeting where it is impractical for the meeting to otherwise be called (Bill s 252E).
Calling and holding meetings of members
10.94 Unless a schemes constitution increases the period, at least 21 days notice of members meetings will be required (Bill s 252F). Due to the usual number of members of a registered scheme, it will generally be impractical for members to be able to agree to shorter notice beforehand and this facility is therefore not provided.
10.95 Notice will be required to be given to all members, directors of the responsible entity and the auditor of the scheme and compliance plan (Bill s 252G(1)). The auditors will also be entitled to the same communications that a member is entitled to receive (Bill s 252H). Otherwise, the rules on giving notice and the contents of the notice are consistent with those for companies (Bill ss 252G(2) - (4), 252J and 252K).
10.96 The responsible entity will be able to appoint any individual as the chairman of a meeting it calls. If it does not, or the elected person is unavailable, the members present will be required to elect a member to chair the meeting (Bill ss 252S(1) and (2)). For a meeting called by members, the members will be required to elect the chairman. This will also be the rule for meetings called by the Court, unless the order determines the chairman (Bill s 252S(3)).
Members rights to put resolutions etc. at meetings of members
10.97 Members of schemes will have a right to put special or extraordinary resolutions on the agenda of meetings that have been called (Bill ss 252L and 252M). They will also be able to circulate statements in relation to matters on agendas of meetings which have been called (Bill s 252N). These provisions are based on provisions applying to companies (Bill ss 249N - 249P). They differ in that the resolutions which may be put on the agenda are limited to special and extraordinary resolutions.
10.98 As with the current prescribed interest provisions (current Part 7.12 Divisions 5 and 5A), the weight attributed to the vote of a collective investment scheme member will depend on the value of their interests. This approach is necessary to avoid unfairness as there may be different classes of interests voting on the same resolution. On a poll, members of schemes will have 1 vote for every dollar of the value of their interests (Bill 253C(2)). The value of the interest is to be worked out under section 253F of the Bill. This provision is based on existing subsection 1069A(5).
10.99 Due to their importance, special and extraordinary resolutions will be required to be decided on a poll (Bill s 253J(1)). A special resolution will require the approval of 75% of the votes cast at a meeting, while an extraordinary resolution will require the approval of the holders of 50% of the votes in the scheme, other than the votes of the responsible entity and its associates (Bill s 253E and Schedule 2 Items 164 and 166). Other resolutions will be decided on a show of hands (with each member having 1 vote), unless a poll is demanded (Bill ss 253C(1) and 253J(2)). If a poll is demanded, the resolution will need to be passed by at least 50% of the votes cast by members entitled to vote on the resolution (Bill ss 253E and 253J(2)).
10.100 In effect, there will be a significant relaxation of the existing approach for amending the constitutions of collective investment schemes. It will no longer be necessary for 25% (by value) of those eligible to cast a vote in order for an amendment to be carried. Rather, it will be sufficient for 75% of the actual votes cast to be in favour of the resolution for it to be carried. This approach makes the requirement for amending scheme constitutions more consistent with that applying to companies. The voting requirements for removing the responsible entity will effectively remain unchanged from that applying under the existing prescribed covenant in paragraphs 7.12.15(6)(g) and 10(g) of the Corporations Regulations.
10.101 The remaining rules for meetings of members of collective investment schemes in the Law will mirror those applying to public companies (Bill ss 252P, 252Q, 252R, 252T-253B, 253D, 253G, 253H, and 253K-253N).