Senate

Supplementary explanatory memorandum relating to sheet PG150

(Circulated by authority of the Treasurer, the Hon Josh Frydenberg MP)

Chapter 1 - Corporate Meetings - Parliamentary Amendments

Outline of chapter

1.1 The Parliamentary Amendments to the Bill:

•

extend the relief provided by Schedule 1 to the Bill from 15 September 2021 to 31 March 2022;

•

remove the requirements for companies and registered schemes to notify members of their right to elect to receive documents in hard copy within two months of the Bill commencing and within two months of a person becoming a member;

•

give ASIC power to grant short-term relief from the requirement to hold a meeting at a physical location or extend the timeframe for holding a meeting if it may not be reasonable to expect compliance with the meeting requirements due to circumstances that are beyond the control of the entity or class of entities (such as those related to COVID-19); and

•

give ASIC power to grant short-term relief from requirements to give documents in hard copy if ASIC is satisfied that it may not be reasonable to expect the entity or class of entities to comply with the requirement due to circumstances beyond the control of the entity or class of entities (such as those related to COVID-19).

1.2 All references to the Bill in this document refer to the Treasury Law Amendments (2021 Measure No. 1) Bill 2021.

1.3 All references to the Act in this document refer to the Corporations Act 2001.

Context of amendments

1.4 Schedule 1 to the Bill makes temporary amendments to the rules relating to meetings of directors, shareholders of companies and members of registered schemes to facilitate the use of electronic technology. The new rules allow meetings to be held virtually, provided that the members as a whole have a reasonable opportunity to participate. They also allow documents relating to meetings to be given and signed electronically and minutes to be kept electronically.

1.5 Section 250N of the Act currently requires companies to hold an AGM within five months of the end of their calendar year or within 18 months of their registration. There are also provisions in the Act that require entities to give hard copy documents within a certain period of time.

1.6 ASIC has a power in section 250P of the Act to extend the timeframe for holding an AGM on application by a company. However, ASIC does not have any other broad powers to grant relief from the requirements relating to holding a meeting or giving a document in hard copy in circumstances where it may not be reasonable to expect compliance with the law due to factors beyond the control of the entity or class of entities.

1.7 The Government is finalising permanent meetings and company document execution reforms, with a view to these reforms being in place prior to the relief provided by Schedule 1 to the Bill finishing. These reforms will continue to facilitate companies and registered schemes' use of technology to validly execute company documents, send meeting related materials and hold meetings. Consultation on these reforms occurred between 25 June 2021 and 16 July 2021 (see "Using technology to hold meetings and sign and send documents" at https://treasury.gov.au/consultation).

Summary of new law

1.8 The relief provided by Schedule 1 to the Bill is extended from 15 September 2021 to 31 March 2022. This relief includes allowing meetings to be held virtually, allowing documents relating to meetings to be provided and signed electronically, and allowing minutes to be kept electronically.

1.9 The requirements in Schedule 1 to the Bill for companies and registered schemes to notify members of their rights to elect to receive documents in hard copy are removed.

1.10 ASIC is given power to:

•

extend the timeframe for holding an AGM on a class basis in exceptional circumstances;

•

allow companies and registered schemes to hold wholly virtual meetings in exceptional circumstances (including beyond the date that the temporary amendments provide by Schedule 1 to the Bill cease to apply); and

•

modify the manner or timeframe in which documents must be given under the Act.

Comparison of key features of new law and current law

Detailed explanation of new law

Extending the relief provided by the Bill

1.11 The Parliamentary Amendments change the date that the amendments in Schedule 1 to the Bill sunset from 15 September 2021 to 31 March 2022. This reflects the ongoing disruptions caused by COVID-19. [Parliamentary Amendments (7), (8), (9) and (10)]

Removing notification requirements

1.12 The Parliamentary Amendments remove the requirements for companies and registered schemes to notify members of their right to elect to receive documents in hard copy within two months of the person becoming a member (for new members) or within two months of the Bill commencing (for existing members). [Parliamentary Amendments (3), (4), (6) and (11)]

1.13 These amendments ensure the Bill does not impose onerous obligations on companies and registered schemes, particularly in the context of the ongoing disruptions caused by COVID-19.

1.14 Members' rights are still protected as the company or registered scheme will only be able to send documents via electronic means if the company or registered scheme has the member's electronic details. Members who have not provided their electronic details may receive a postcard with details that allow them to access the document online. It should also be noted that many members have already consented to receiving electronic copies and members who have opted into hard copy documents will continue to receive hard copy documents. In addition, alternative notification requirements are being explored for future permanent reforms.

New relief powers

1.15 The Parliamentary Amendments give ASIC new emergency powers to:

•

extend the timeframe for companies to hold an AGM on a class basis;

•

allow companies to hold a wholly virtual meeting even after the expiration of the temporary relief provided in the Bill; and

•

allow ASIC to modify the manner or timeframe in which documents must be given under the Act.

[Parliamentary Amendment (5)]

1.16 These powers are permanent and do not sunset on 31 March 2022. Accordingly, the Parliamentary Amendments move the provisions currently in the Bill into a separate Part 1 and alter the sunsetting provision so that it applies only to Part 1. [Parliamentary Amendments (1), (2), (7) and (9)]

Extending the timeframe for holding an AGM

1.17 Subsections 250N(1) and (2) of the Act require public companies to hold regular AGMs.

1.18 ASIC may, by legislative instrument, make a determination specifying that a class of public companies may delay their AGMs. In such a case, the companies are taken to comply with subsections 250N(1) and (2) in relation to the AGMs provided the companies hold the AGMs within the period of extension specified in the determination. [Parliamentary Amendment (5)]

1.19 ASIC can only make the determination if it considers that it may be unreasonable to expect the companies in the specified class to hold AGMs within the time required under section 250N because of a situation that is beyond the control of the companies in that class. [Parliamentary Amendment (5)]

1.20 The determination may be subject to specified conditions. A company to which a condition applies must comply with the condition. If the company does not comply, ASIC or another person may bring an action and the Court may order the company to comply with the condition in a specified way. [Parliamentary Amendment (5)]

1.21 Allowing the Court to order the company to comply with the condition in a specified way ensures the determinations are effective and is consistent with similar provisions throughout the Act (see e.g. section 926A of the Act).

1.22 Determinations made by ASIC cannot be in place for more than 12 months after they commence. This reflects the fact that the power is only designed to be used to address temporary situations where urgent relief is required. [Parliamentary Amendment (5)]

1.23 The new determination making power only applies to classes of public companies as there is already an individual relief power in section 250P of the Act.

Allowing meetings to be held wholly virtually

1.24 The Parliamentary Amendments also include an emergency power for ASIC to grant relief to allow a company or registered scheme, or a class of companies or registered schemes, to hold a wholly virtual meeting. ASIC may also impose conditions on the grant of the relief. [Parliamentary Amendment (5)]

1.25 Again, the power is designed to be used to provide short-term emergency relief. The power can only be used if there are circumstances beyond the entity or class' control that make it potentially unreasonable to expect them to hold a meeting at a physical location. Further, instruments made under the power must sunset after no more than 12 months. [Parliamentary Amendment (5)]

1.26 In practice, this power would only be exercised by ASIC after the temporary relief provided by the Bill ends. While the temporary relief is on foot, all companies and registered schemes may hold wholly virtual meetings (even in the absence of ASIC exercising its emergency relief power).

1.27 If ASIC grants relief to a class, it must use a legislative instrument which will be subject to disallowance. Relief granted to an individual entity may be set out in a notifiable instrument as it will generally not be legislative in character. This mirrors the approach taken for other ASIC exemption and modification powers, such as section 1217 of the Act. [Parliamentary Amendment (5)]

Granting relief relating to the giving of documents

1.28 ASIC is also granted a new emergency power that allows it to grant relief to an entity or a class of entities to:

•

allow the entity or class of entities to provide a document, or a class of documents, by means of an electronic communication rather than in physical form;

•

allow the entity or class of entities to provide the recipient with sufficient information to allow the recipient to access the document, or class of documents, electronically (rather than providing the document in physical form); or

•

extend the timeframe for providing the document or class of documents.

[Parliamentary Amendment (5)]

1.29 If the entity is granted relief so that it does not need to provide the document in hard copy, it must comply with the requirements in the Electronic Transactions Act 1999 that relate to the means used to give a document electronically. [Parliamentary Amendment (5)]

1.30 Again, this power is designed to be used to provide short-term relief in exceptional circumstances. ASIC can only exercise the power if it is satisfied that it may not be reasonable to expect the entity or class of entities to comply with their requirements within the stipulated timeframe due to circumstances beyond their control. Further, any instrument made under the power must not be in place for more than 12 months. [Parliamentary Amendment (5)]

1.31 This power could be used by ASIC to allow entities to provide documents electronically even if the document was not covered by the new regime that allows meetings-related documents to be provided electronically. It could also be used to override the effect of a person making an election to receive hard copies, such as under sections 253RB, 253RC or 314.

1.32 The power may be used to grant relief to a class of entities (via a legislative instrument) or to an individual entity (via a notifiable instrument). Relief may be granted subject to conditions. This mirrors the new power for ASIC to allow a wholly virtual meeting (see above discussion). [Parliamentary Amendment (5)]