Senate

Revised Explanatory Memorandum

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

Chapter 1 - Use of technology for meetings and execution of documents

Outline of chapter

1.1 The Bill creates a permanent statutory mechanism for the electronic execution of company documents. It also allows companies, registered schemes and disclosing entities to sign and provide meetings-related documents electronically. Companies and registered schemes may also use technology to hold meetings, including hybrid meetings on a permanent basis. Finally, other miscellaneous amendments are made to ensure that meetings are conducted effectively.

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

Context of amendments

1.3 Schedule 1 to the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 commenced on 14 August 2021. The Schedule allows companies and registered schemes to hold virtual meetings and electronically sign and send documents until 31 March 2022.

1.4 On 17 February 2021, the Government announced its intention to make permanent changes relating to the execution of company documents and the electronic communication of meetings-related materials. It also announced that it would conduct a 12-month review of annual general meetings of companies and registered schemes.

1.5 The Bill makes changes to the Act to give effect to that announcement. It refines the drafting approach taken in the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 by restructuring the rules so that they apply to all types of member meetings. It also moves the provisions relating to electronic communications and electronic signatures from Chapter 2G to Chapter 1 so that they can be extended in the future to include additional types of documents that do not relate to meetings.

Summary of new law

1.6 The Bill allows certain documents to be signed in flexible and technology neutral manners. This change applies to:

•

the signing of certain documents (including deeds) by or on behalf of a company; and

•

the signing of documents which relate to certain meetings or resolutions.

1.7 Amendments are also made to extend the statutory document execution mechanisms to proprietary companies with a sole director and no company secretary.

1.8 The Bill allows companies and registered schemes to hold physical and hybrid meetings. Wholly virtual meetings may also be used if they are expressly required or permitted by the constitution.

1.9 All meetings, regardless of how they are held, must give the members as a whole a reasonable opportunity to participate. This includes holding the meeting at a reasonable time and place and using reasonable technology to conduct a virtual meeting and connect different physical locations together.

1.10 Documents relating to meetings may be signed and given using electronic means, regardless of whether the meeting is a virtual, physical or hybrid meeting.

1.11 The Bill also allows a member or group of members with at least 5 per cent of the votes to require a listed company or registered scheme to appoint an independent person to observe or report on a poll.

Comparison of key features of new law and current law

Detailed explanation of new law

Signing documents

1.12 Schedule 1 to the Bill allows certain documents to be signed in flexible and technology neutral manners. This allows for business communications to be conducted with greater ease and lower costs.

Technology neutral signing

1.13 Division 1 of Part 1.2AA of the Act sets out rules for how certain documents can be signed in a technology neutral manner. These rules are in addition to sections 126 and 127 of the Act which set out the requirements for the valid execution of documents.

1.14 Division 1 applies to:

•

documents (including deeds) signed by or on behalf of a company under sections 126 and 127 of the Act;

•

documents signed under the Act which relate to certain meetings or resolutions; and

•

any document specified in the regulations.

[Schedule 1, item 1, section 110]

1.15 A person may sign documents to which Division 1 applies by signing a physical or electronic form of the document. The person may sign a physical form of the document by hand. [Schedule 1, item 1, section 110A(1)]

1.16 The person is taken to have signed a document in accordance with Division 1 if:

•

the method identifies the person and indicates the person's intention in respect of the information recorded in the document; and

•

the method used was either as reliable as appropriate for the purpose for which the information was recorded, or proven in fact to have fulfilled the functions described in the preceding point.

[Schedule 1, item 1, section 110A(2)]

1.17 These requirements mirror those in sections 10(1)(a) and (b) of the Electronic Transactions Act 1999 and ensure documents can be signed in technology neutral manners whilst preserving the integrity of signature requirements.

1.18 In establishing the person's identity, the signature method need not be a unique identifier but rather it should identify the person signing the document.

1.19 To ensure documents can be signed in flexible manners, the Bill makes clear that Division 1 does not require:

•

persons to sign the same form of the document as another person;

•

persons to sign the same page of the document as another person;

•

persons to use the same method to sign the document as another person; or

•

the document signed by a person to include all the information recorded in the document.

[Schedule 1, item 1, section 110A(4)]

1.20 The Bill takes a technology neutral approach and does not mandate the use of any particular type of technology. There are a range of different technologies that are currently in use, such as, online platforms or using stylus tools to sign PDFs. The Bill is also sufficiently flexible to allow for the use of other technologies that may be developed in the future.

1.21 Division 1 does not limit the ways in which a person may sign a document (including a deed). Similarly, nothing in the Bill prevents a document from being signed in the traditional manner or using traditional practices. For example, documents can be still be signed under section 127 by applying a wet-ink signature to the document.

1.22 A person can sign documents in different capacities. If a person is required or permitted to sign a document in more than one capacity, then they are treated as a different person in each capacity. If provided for in the document, a person may sign the document in one or more of these capacities by signing the document once. This gives signatories extra flexibility in choosing the manner in which documents are signed. [Schedule 1, item 1, section 110A(5) and notes to section 110A(5)]

1.23 Sections 127(3A), (3B) and (3C) of the Act are repealed. These sections contained rules about signatures under section 127 which have been superseded by Division 1. [Schedule 1, item 11, sections 127(3A), (3B) and (3C)]

Lodgement of documents

1.24 Documents lodged with ASIC or the Registrar can be signed in accordance with Division 1 of Part 1.2AA of the Act (concerning technology neutral signing).

1.25 If a document is required or permitted to be signed under the Act and has been signed in accordance with Division 1, then ASIC or the Registrar cannot refuse to receive or register the document on the mere basis the document has not been signed. ASIC or the Registrar can continue to refuse to accept a document if it does not comply with other lodgement requirements. [Schedule 1, item 1, section 110B]

Agents can make contracts and execute documents (including deeds)

1.26 Section 126 of the Act is amended to extend the functions of company agents and allow agents to exercise these functions more easily.

1.27 An agent may now execute a document (including a deed), as well as make, vary, ratify or discharge a contract. [Schedule 1, item 4, section 126]

1.28 The agent need not 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. ^[1] [Schedule 1, item 4, section 126(4)]

1.29 If the company's power is exercised under section 126 by signing a document, then the flexible, technology neutral method for signing a document in new Division 1 of Part 1.2AA may be used. A document or deed does not need to be on paper, parchment of vellum or be witnessed or delivered to be valid. [Schedule 1, items 1 and 4, sections 110, 126(5)-(7) and 127(3A)]

1.30 Other methods of executing the document may also be used. For example, a company's constitution may set out other methods of executing and/or signing documents. [Schedule 1, item 4, section 126(8)]

1.31 If a company executes a document through an agent under section 126, people will be able to rely on the assumptions in subsection 129(3) for dealings in relation to the company.

1.32 Section 126 does not affect the operation of other laws that require a particular procedure to be complied with in relation to the contract or document, other than to the extent that the law is inconsistent with this section. [Schedule 1, item 4, section 126(2)]

Documents (including deeds) can be executed in technology neutral manners

1.33 Sections 126 and 127 of the Act are amended to make clear that documents can be executed in the new flexible and technology neutral manner established in new Division 1 of Part 1.2AA. [Schedule 1, items 6, 7, 9 and 10, notes to sections 127(1), (2A) and (3)]

1.34 The Bill also provides that, consistent with sections 126 and 127 of the current law, a document or deed does not need to be delivered to be validly executed as a deed. This will be the case even where the common law requires that a document or deed is delivered in order for it to be validly executed. Where a document is executed by signature, the signature does not need to be witnessed, or made on paper or parchment of vellum to be valid. [Schedule 1, items 1, 4, 11 and 12 sections 110A(1), 126(5) and (6) and 127(3A)-(3B)]

1.35 The fixing of a common seal to a document under section 127(2) can also be witnessed electronically, provided:

•

the person observes, by electronic means or by being physically present, the fixing of the seal; and

•

the person signs the document; and

•

a method is used to indicate that the person observed the fixing of the seal to the document.

[Schedule 1, item 9, section 127(2A)]

Sole director companies

1.36 Amendments are made to expand the statutory document execution mechanisms in section 127 of the Act to proprietary companies with a sole director and no company secretary.

1.37 For a proprietary company with a sole director and no company secretary, a document is validly executed if:

•

the sole director signs the document; or

•

the sole director witnesses the fixing of the company's common seal to the document.

[Schedule 1, items 5 and 8, sections 127(1)(c) and 127(2)(c)]

Entitlement to make assumptions and other consequential amendments

1.38 The assumptions that persons are entitled to make in relation to dealings with a company have been updated to reflect the other changes that are made to the rules relating to agents and the execution of company documents.

1.39 A person may assume that a document has been duly executed by a company if:

•

the document appears to have been signed in accordance with subsection 127(1); or

•

the company's common seal appears to have been fixed to the document in accordance with subsection 127(2) and the fixing of the common seal appears to have been witnessed in accordance with that subsection and subsection 127(2A).

[Schedule 1, items 13 and 14, sections 129(5) and (6)]

1.40 For the purposes of making the assumptions under sections 129(5) and (6) of the Act, a person may also assume that anyone who signs a document, or witnesses the fixing of the company's common seal to the document, and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices. A similar assumption may be made in circumstances where the person is the sole director (and the company has no secretary) or where the person is the sole company secretary. [Schedule 1, items 13 and 14, sections 129(5) and (6)]

1.41 Consequential amendments have also been made to:

•

update the Small Business Guide to reflect the changes to the way in which a company may execute a document or an agent may exercise a company's powers; and [Schedule 1, items 2 and 3, paragraph 7 of the Small Business Guide in Part 1.5]

•

update sections 253R and 253RD to reflect the new rules for executing documents. [Schedule 1, items 16, 17 and 18, sections 253R(b) and (c) and 253RD]

Giving documents electronically

1.42 The Bill permanently allows a company, the responsible entity of a registered scheme or a disclosing entity to give meetings-related documents to a person electronically or in physical form.

1.43 It does this by establishing a general regime that covers the electronic communication of documents in a new Part in Chapter 1 of the Act. [Schedule 2, item 2, Part 1.2AA]

Documents covered by the regime

1.44 This new regime applies to any meetings-related document that a company, responsible entity or disclosing entity is required or permitted to give, send or otherwise provide to a person under the Act. It does not apply to documents which are sent to ASIC or the Registrar. [Schedule 2, item 2, sections 110C]

1.45 Examples of such documents include (but are not limited to):

•

notices of meetings;

•

notices of a resolution or a record of a resolution;

•

notices of a statement in relation to a meeting or a matter to be considered at a meeting; and

•

minute books.

1.46 Regulation-making powers have been inserted which allows for the modification of the primary law to expand the scope of the regime to capture other entities. These powers ensure that, in the event of unintended or unforeseen circumstances, the law can be quickly and flexibly adapted to impose the obligations in relation to sending documents on appropriate persons. The powers cannot be used to impose additional obligations on entities in relation to sending documents or to alter the obligations in the primary law. [Schedule 2, item 2, sections 110C(1)(d), (5) and (6)]

1.47 The modification powers, along with the rest of the regime, will also be reviewed 2 years after the new rules take effect. If the power is used, then the Regulations would be subject to disallowance.

1.48 The power to modify the primary law also provides the flexibility to adapt the regime in response to future changes to the law. For example, the Government have announced future primary law changes to further modernise business communications and this power may be used to give effect to these reforms.

1.49 The intention is to expand the regime in the future to cover other types of documents as part of the 'Modernising Business Communications' reforms. Those proposed reforms will also allow electronic communications to be used to send documents from members to entities.

1.50 There is also a power for regulations to expand the list of documents that are covered by the regime. [Schedule 2, item 2, section 110C(2)(d)]

How a document may be sent

1.51 A document may be provided either by:

•

sending the document in physical form;

•

giving the document to the person by using electronic means (e.g., sending an email);

•

providing the person, in physical or electronic form, with details sufficient to allow them to view or download the document electronically (e.g., by giving them a card or sending them an email with a link to a website); or

•

in any other permitted way (e.g., in a way permitted by a more specific provision which deals with how a particular type of document is sent to a person or in a way which is set out in a company's constitution).

[Schedule 2, item 2, sections 110D(1) and (4)]

1.52 However, 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. This replicates the condition in the Electronic Transitions Act 1999 that applies to the electronic provision of documents. [Schedule 1, item 1, section 110D(2)]

1.53 Annual reports and documents prescribed in the regulations are taken to be sent if they are made readily available on a website. It is expected that companies and registered schemes would satisfy this by publishing the document on their website or a share registry website. This is consistent with the existing rules for sending annual reports to members. [Schedule 2, item 2, sections 110D(1)-(3)]

Elections by members

1.54 A member may elect to receive documents in physical form or electronically. Such an election may be made in respect of:

•

all documents (a standing election);

•

specified classes or types of documents (a standing election); or

•

a single specified document (an ad hoc request).

[Schedule 2, item 2, sections 110E, 110H and 110J]

1.55 The sender must take reasonable steps to provide the member with the document or class of documents in the requested form (unless ASIC exercises its emergency powers and grants relief). A failure to do so is a strict liability offence with a penalty of 30 penalty units. [Schedule 2, items 2 and 48, sections 110F(1)-(3), 110G(3) and 110J (2) and (5) and Schedule 3]

1.56 The failure to provide a document in the required form is a different offence from the outright failure to provide a document in any form. The Act already includes offences for an outright failure to provide a document in any form, and for some documents, the penalties for these existing offences are greater than 30 penalty units.

1.57 A strict liability offence for failing to provide a document in the required form is appropriate as it ensures that ASIC can efficiently and expeditiously deal with low-level offending. This bolsters the integrity of the regime and encourages compliance. The strict liability offence meets all the conditions listed in the Attorney-General's Department's A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.

1.58 The failure to provide a document in the required form does not invalidate the giving of the document by the sender. A no invalidity clause is appropriate because there are serious consequences that attach to failing to provide some of the documents covered by the regime and these severe penalties are not appropriate in circumstances where the document was provided (but in the incorrect form). [Schedule 2, item 2, sections 110F(4) and 110G(4)]

1.59 Further detail on the process for making an election and ASIC's emergency powers is below.

Standing elections

1.60 A standing election is in place on the business day after it is received by the sender (unless the election specifies a later start date). There is also a power for regulations to be made to specify a later date. [Schedule 2, item 2, section 110E(7)]

1.61 However, the sender is not required to provide a document in hard copy if that document is required to be provided to the member within the next 30 days. This ensures that the sender has adequate time to print and post documents and allows enough time for the mail to reach the member. The delayed effect of an election also prevents a sender from being in a position where it cannot comply with its obligation to notify members of a meeting within a stipulated timeframe. [Schedule 2, item 2, section 110E(8)]

1.62 A member who has elected to receive documents in hard copy may revoke their election. Such a revocation applies from the business day after it is received by the sender. The sender may send documents to the member electronically or in physical form from the date of the revocation. [Schedule 2, item 2, section 110E(7)(b)]

Ad hoc requests

1.63 A member may make an ad hoc request to receive a particular document electronically or in physical form. This request may be made within a reasonable time before the sender's obligation to send the document arises or within a reasonable time after the document has been received. [Schedule 2, item 2, section 110J(1) and (2)]

1.64 If a member makes a request, the sender must take reasonable steps to send the document in the requested form within 3 business days after receiving the request except in two situations. [Schedule 2, item 2, sections 110F(2)(a), 110G]

1.65 The first situation is where a request is made before the document is required or permitted to be sent. In this case, the sender does not need to send the document sooner than required under the specific section in the Act that gives rise to the obligation. For example, if a member asks for their next meeting notice to be provided in physical form three months before the meeting, the company only needs to give them the notice of the meeting in physical form 21 days before the meeting as per section 252F. [Schedule 2, item 2, section 110F(2)(b), 110G]

1.66 The second situation is where ASIC exercises its existing powers to grant relief in section 1345 of the Act. [Schedule 2, item 2, section 110F(1)]

Elections not to receive documents

1.67 Members of companies and registered schemes can also elect not to be sent an annual report or any document prescribed in the regulations. This is consistent with the existing law. [Schedule 2, item 2, sections 110E(4), (5) and (6)]

1.68 A failure to take reasonable steps to avoid sending a document to a member who has made an election not to be sent a document is a strict liability offence. The penalty for this offence is 30 penalty units, which is equivalent to the penalties for other failures to comply with elections. [Schedule 2, items 2 and 48, section 110G and Schedule 3]

1.69 A strict liability offence for failing to comply with an election not to receive a document is appropriate as it ensures that ASIC can efficiently and expeditiously deal with low-level offending. This bolsters the integrity of the regime and encourages compliance. The strict liability offence meets all the conditions listed in the Attorney-General's Department's A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.

ASIC's relief powers

1.70 The Treasury Laws Amendment (2021 Measures No. 1) Act 2021 gives ASIC a new emergency relief power in section 1345. This power allows ASIC to relieve an individual or class of entities from providing a document in physical form or extend the timeframe for providing the document. The power can only be exercised if ASIC considers that it may not be reasonable to expect the entity to comply with the law due to circumstances beyond the entity's control.

1.71 This Schedule amends this power so that ASIC can also relieve an individual or class of entities from providing a document in electronic form. [Schedule 2, items 40-42, sections 1345(3A), (5) and (6A)]

1.72 It also clarifies that the power applies to situations where the Act uses a synonym for 'give', such as 'send'. [Schedule 2, items 40, 43 and 44, sections 1345(3), (11) and (12)]

1.73 The power is designed to be used only in exceptional circumstances, such as where an IT failure makes it unreasonable to expect a sender, or a class of senders, to provide an electronic document. Unless revoked earlier, an ASIC determination is repealed at the end of 12 months after the day on which it commences.

Notification requirements

1.74 Members of public companies, disclosing entities and registered schemes must, at least once per year, be notified of their right to elect to receive a document in a specified form (physical form or electronic form), or request that a particular document be provided in a specified form. The company or registered scheme must take reasonable steps to provide this notice every time a document is sent to the member. Notice can be given in writing or by publishing a notice on the company or share registry's website. [Schedule 2, item 2, sections 110K(1)-(4)]

1.75 A failure to notify a member of their right to make an election is a strict liability offence carrying a penalty of 30 penalty units. This is the same as the penalty that applies if a company, responsible entity or disclosing entity does not notify its members of their right to receive an electronic or hard copy of the annual report. [Schedule 2, items 2, 38, 45 and 48, sections 110K(5), 1311(1A)(a) and Schedule 3]

1.76 A strict liability offence is appropriate in this circumstance as it is necessary to strongly deter companies or registered schemes from failing to advise members of their right to elect to receive a hard copy. The imposition of a strict liability offence reduces non-compliance by ensuring that ASIC can efficiently and expeditiously deal with low-level offending, thereby bolstering the integrity of the regime.

1.77 This strict liability offence meets all the conditions listed in the Attorney-General's Department's A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers. It does not exceed 300 penalty units for a body corporate and preserves the defence of honest and reasonable mistake of fact to be proved by the accused on the balance of probabilities.

Elections made before commencement

1.78 If a member has notified a company or responsible entity that they wish to receive documents in physical or electronic form, or that they do not want to be sent a copy of an annual report, prior to the commencement of the Schedule then that member will be taken to have made an election for the purposes of the new law and will not need to re-make the election. If a member made a request to receive a full financial report prior to commencement then that request will continue to have effect after commencement This effectively converts any elections made under a contract in a statutory election under the Act. [Schedule 2, item 47, sections 1687D, 1687E, 1687F, 1687G and 1687H]

Other consequential amendments

1.79 The Bill also makes the following consequential amendments to facilitate the giving and signing of documents electronically:

•

section 249J is amended to ensure that members can be notified of meetings electronically; [Schedule 2, items 7-10, section 249J]

•

the rules in relation to the receipt of proxy documents by companies and responsible entities for registered schemes are amended to ensure that they continue to operate effectively; [Schedule 2, items 12, 23 and 24, sections 250B(3) and 252Z(3A) and (4)]

•

the rules relating to when notices of meetings are taken to be received are updated to state that electronic notices are taken to be received on the business day after they are sent; [Schedule 2, items 18-21, sections 252G(3)(c) and 252G(4)]

•

the heading of Part 2G.5 is updated to more accurately reflect the contents of the Part; and [Schedule 2, item 27, heading to Part 2G.5]

•

Divisions 1, 2 and 3 of Part 2G.5 is repealed. [Schedule 2, item 28, Divisions 1, 2 and 3 of Part 2G.5]

1.80 Amendments are also made to sections 314, 315 and 316 and Schedule 3 to ensure that the rules in relation to sending annual reports operate consistently with the new rules for giving documents electronically. [Schedule 2, items 30-37 and 50, sections 314, 315 and 316 and Schedule 3]

Hybrid meetings of shareholders of a company or registered scheme

1.81 The Bill also makes permanent changes to clarify that companies and registered schemes can use technology to hold meetings.

How meetings may be held

1.82 Companies may hold a meeting at:

•

one or more physical locations (a physical meeting);

•

one or more physical locations and using technology to allow persons to attend virtually (a hybrid meeting); or

•

using technology to allow members to attend virtually if this is expressly permitted or required by the constitution (a wholly virtual meeting).

[Schedule 2, items 11 and 22, sections 249R and 252P]

1.83 The Bill also clarifies that companies registered as bodies corporate under the Australian Charities and Not-for-profits Commission Act 2012 may hold physical, hybrid or wholly virtual meetings. [Schedule 2, item 3, subsection 111L(1)(table item 9, column 1)]

1.84 The new law is not prescriptive about how a meeting should be conducted. It does not mandate a particular format for a meeting or a particular way in which a show of hands or a vote on a poll is to be conducted. It recognises that the meeting rules apply to a broad range of companies, from small not-for-profit companies to large, publicly listed companies, and allows each company to select the format for the meeting that is most appropriate for that company.

1.85 All persons participating in the meeting (whether by being physically present or using electronic means) are taken to be 'present'. This means that all persons attending virtually at the time that the quorum is called must be counted for the purposes of determining whether there is a quorum. [Schedule 2, items 11 and 22, sections 249RA(3) and 252PA(3)]

1.86 The Bill also sets out the place and time of a meeting. These rules are summarised below:

Table 1.1 : Place and deemed time of different types of meetings

[Schedule 2, items 11 and 22, sections 249RA(1)-(2) and 252PA(1)-(2)]

Reasonable opportunity to participate

1.87 Regardless of how a meeting is conducted, the members as a whole must be given a reasonable opportunity to participate. [Schedule 2, items 11 and 22, sections 249S(1) and 252Q(1)]

1.88 This requirement has several components.

1.89 First, for a physical meeting or a hybrid meeting, the physical venue for the meeting must be reasonable. If there is more than one physical venue, only the main physical venue (as set out in the meeting notice) needs to be reasonable. [Schedule 2, items 11 and 22, sections 249S(4)-(5) and 252Q(4)-(5)]

1.90 The reasonableness of a physical venue could be determined by considering where the company or registered scheme is registered, where the members reside or where the directors are located.

1.91 Second, the meeting must be held at a reasonable time. The reasonableness of the time for a physical or hybrid meeting is determined by having regard to the place at which the meeting is held (that is, it may not be the same as the time that the meeting is deemed to be held as per Table 1.1). A wholly virtual meeting is held at a reasonable time if that time would have been reasonable at any physical venue where it would have been appropriate to hold the meeting. [Schedule 2, items 11 and 22, sections 249S(3) and 252Q(3)]

1.92 Third, reasonable technology must be used to connect more than one physical venue or facilitate virtual attendance. For instance, the technology used to facilitate virtual attendance would need to be sufficient to allow members to vote. The directors should also consider whether the technology needs to give members as a whole the right to observe the directors or the main proceedings. [Schedule 2, items 11 and 22, sections 249S(6)-(7) and 252Q(6)-(7)]

1.93 The new law also makes explicit that the technology used to facilitate virtual attendance must allow members to exercise any pre-existing right that they may have to ask questions or make comments (such as under sections 250S and 250T) both verbally and in writing. For example, the company could satisfy this requirement by offering members both the opportunity to ask questions orally by dialling into a phone hook-up and the opportunity to type their questions into a chat function. To avoid doubt, this provision does not create any new right for members to ask questions or comments, but simply relates to the manner in which any pre-existing rights can be exercised. [Schedule 2, items 11 and 22, sections 249S(7) and 252Q(7)]

1.94 Prior to these amendments, sections 249R, 249S, 252P and 252Q included a requirement for meetings to be held at a reasonable time and place, and for reasonable technology to be used to connect more than one physical venue. The new law clarifies that these rights are part of the general right to give the members as a whole a reasonable opportunity to participate.

1.95 These requirements are not an exhaustive list of what is involved in giving the members as a whole a reasonable opportunity to participate. [Schedule 2, items 11 and 22, sections 249S(2) and 252Q(2)]

1.96 A Court may declare that a meeting is invalid if the members as a whole do not have a reasonable opportunity to participate and the Court is of the opinion that a substantial injustice has occurred and cannot be remedied by a Court order. [Schedule 2, item 39, section 1322(3A)]

1.97 Consequential amendments have also been made to ensure that there are no ongoing changes to the requirements relating to using technology in directors' meetings. [Schedule 2, item 6, section 248D]

Review

1.98 The provisions relating to meetings and electronic communication must be reviewed no later than the earliest practicable day after the end of two years after this Bill commences. The review of different provisions can be conducted at different times. [Schedule 2, item 47, sections 1687J(1)-(2) and (4)]

1.99 The review of sections 249R(c) and 252P(c), which allow for companies and registered schemes to hold wholly virtual meetings, must be conducted by an independent panel, with at least one panel member who has experience representing the interests of shareholders, advocating for corporate social responsibility, and in corporate governance and the role of company directors. This aims to ensure that the review takes into account the views of companies, registered schemes, and their members. [Schedule 2, item 47, sections 1687J(2A)]

1.100 A written report must be prepared and tabled in Parliament within 15 sitting days after the report is given to the Treasurer. [Schedule 2, item 47, sections 1687J(3) and (5)]

1.101 If a report on the operation of sections 249R(c) and 252P(c) is not tabled in parliament before the end of a period of 30 months after the Bill commences then the amendments to those provisions 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. [Schedule 2, item 47, section 1687K and note to section 1687J(2)]

1.102 The Government must prepare a response to the report and table it in each House of Parliament no later than the first sitting day of that house after the end of a 3 month period beginning on the day that the report is first tabled in either House of Parliament. [Schedule 2, item 47, section 1687J(6)]

Requests for independent reports on polls

1.103 The Bill provides that certain members of listed companies and registered schemes may request that the company or responsible entity appoint an independent person to observe and/or scrutinise and prepare a report on the outcome of the polls at the meeting of the members. [Schedule 1, item 29 section 253UB(1), 253UC(1), 253UD(1) and 253UE(1)]

1.104 A member or group of members with at least 5 per cent of the votes may request that an independent person be appointed. The request must be made in writing and specify the meeting to which it relates. If the request relates to the observation of a poll then the request must be made no later than five business days before the meeting. If the request relates to a report on the outcome of a poll then the request can be made up to five business days after the meeting. [Schedule 2, item 29, sections 253UB(1)-(2), 253UC(1)-(2), 253UD(1)-(2) and 253UE(1)-(2)]

1.105 The company or responsible entity of a registered scheme must take reasonable steps to appoint an independent person after receiving the request. If the request is in relation to the observance of a poll then the company or responsible entity should take reasonable steps to ensure that the independent person observes the poll. If the request is in relation to the observation of a poll, and the independent person notifies the company of any matters in relation to the outcome of the poll, then the company must take reasonable steps to notify members of those matters .[Schedule 2, item 29, sections 253UB(3), 253UC(4) and (5), 253UD(3) and 253UE(4)]

1.106 The person appointed to observe and/or scrutinise prepare the report must be independent of the company or the registered scheme. There is a presumption that the auditor or registry service provider of the company or registered scheme is an independent person. However, this presumption would be rebutted if the poll was in respect of an issue that related to the auditor or registry service provider, such as a vote to remove the person. [Schedule 2, item 29, sections 253UA, 253UB(6), 253UC (7), 253UD(6) and 253UE(7)]

1.107 The company or responsible entity of the registered scheme is responsible for paying any fees associated with appointing the independent person. [Schedule 2, item 29, sections 253UB(5), 253UC(6), 253UD(5) and 253UE(6)]

1.108 It is expected that where a company or registered scheme has an independent person observe and/or scrutinise and prepare a report on polls as part of their standard meeting practices this will satisfy these requirements and there will be no additional burden on these entities. Similarly, if a scrutineer is appointed under Chapter 14 of the ASX Listing Rules and a request is made by a member or group of members it is expected that the scrutineer and the independent person would be the same person and only one report would need to be prepared.

1.109 An independent person may request information from the company or responsible entity if they reasonably believe that the information is necessary for the scrutiny of a poll, preparation of the report or observation of a poll. The company or registered scheme must provide the independent person with the information that the independent person requests. A company or responsible entity will not be required to provide the independent person with the information if the document is privileged or would incriminate its directors as the Bill does not alter any fundamental common law rights. [Schedule 2, item 29, section 253UF]

1.110 After the report has been completed the company or responsible entity must make the report available to the members within a reasonable time. In line with the requirements for keeping a record of meeting minutes, the company or responsible entity must keep a record of the report. [Schedule 2, item 29, sections, 253UC(4), 253UE(4) and 253UG]

1.111 A company or responsible entity commits a strict liability offence if it breaches its obligations in relation to taking reasonable steps to appoint an independent person, providing access to information, publishing the report, keeping a record of the report or failing to report to members any irregularities observed by an independent person. The maximum penalty for these offences is 40 penalty units. Strict liability offences are appropriate in this circumstance, as it is necessary to strongly deter misconduct that can have serious detriment for members. [Schedule 2, items 29 and 49, sections 253UB(4), 253UC(5) 253UD(4), 253UE(4) and (5), 253UF(3) and (4) and Schedule 3]

1.112 Strict liability offences reduce non-compliance, which bolsters the integrity of the regulatory regime enforced by ASIC. Strict liability is particularly beneficial to regulators as they need to deal with offences expeditiously to maintain public confidence in the regulatory regime.

1.113 The strict liability offences in this Schedule meet all the conditions listed in the Attorney-General's Department's A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers. For example, the fines for the offences do not exceed 60 penalty units for persons other than a body corporate or 300 penalty units for a body corporate. The application of strict liability, as opposed to absolute liability, preserves the defence of honest and reasonable mistake of fact to be proved by the accused on the balance of probabilities. This defence maintains adequate checks and balances for persons who may be accused of such offences.

Voting on substantive resolutions

1.114 The Bill also provides that votes on resolutions which are set out in a meeting notice paper for a meeting of a listed entity's members must be conducted by way of a poll. These resolutions are usually substantive in nature and polls are more accurate, reliable and better reflects the voting power of all shareholders than votes which are conducted by a show of hands. A resolution will not be on a meeting notice paper if it is procedural in nature. [Schedule 2, items 15, 16, 17 and 25, sections 250J(1), 250JA, 250M and 253J(1A)]

1.115 This requirement is not a replaceable rule and will need to be complied with even if there is a contrary clause in the company's constitution.

1.116 The default method for conducting votes at a meeting has been removed. The replaceable rule now provides that a resolution may be decided on a show of hands if a poll has not been demanded. This is no longer a mandatory requirement that applies for all companies that have adopted the replaceable rule and for all ordinary resolutions put to vote at a meeting of a scheme's members. [Schedule 2, items 15 and 26, sections 250J(1) and 253J(2)-(2A)]

1.117 These changes implement recommendation 6.4 of the 4th edition of the ASX Corporate Governance Principles and Recommendations. This recommendation was made on the basis that a poll is the only way that the chair of a meeting can ascertain the true will of all security holders. The ASX recommendation also notes that votes which are determined by a show of hands fail to uphold the 'one security, one value' principle.

1.118 Consequential amendments have also been made to:

•

extend the obligation on companies to record the details of members and proxies voting on polls to all polls which are required, whether demanded or on a meeting notice paper; [Schedule 2, items 4-5, sections 201R and 225(2)]

•

ensure that proxies with 2 or more appointments who have received conflicting instructions on how to vote from appointees do not vote by show of hands; and [Schedule 2, item 13, section 250BB(1)(b)]

•

preserve the rules for when a chair is deemed to have been appointed as a proxy for a resolution. [Schedule 2, item 14, sections 250BC(c)]

Application and transitional provisions

1.119 The amendments in Schedule 1 which apply to signing and executing documents apply to documents which are signed or executed on or after the day that the Schedule commences. [Schedule 1, item 18, sections 1687 and 1687A]

1.120 The amendments in Schedule 2 apply to meetings of members or directors which are held and documents sent on or after 1 April 2022. [Schedule 2, item 47, section 1687B]

1.121 Schedule 2 makes the changes in the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 permanent by repealing the sunsetting provision and then making the necessary consequential amendments. [Schedule 2, items 45 and 46, note to section 1679A and sections 1679E and 1679F]