27 Mar ASIC REVISES AGM GUIDELINES IN RESPONSE TO COVID-19 RESTRICTIONS
A small number of ASX-listed companies already host ‘hybrid’ AGMs, that is where a meeting is physically held but live streamed so shareholders can participate and take part in polls online. However, ASIC’s recent support for virtual AGMs to meet COVID-19 meeting restrictions paves the way for many listed companies to conduct their AGM online in the coming months.
Updates to guidelines
In summary, ASIC has acknowledged that COVID-19 may “temporarily impact on companies’ ability” to hold AGMs. As such, for companies with a 31 December 2019 financial year end who are required to hold an AGM by 31 May 2020, ASIC has confirmed it:
- Will take no action if AGMs are postponed for two months (until the end of July)
- Supports holding of AGMs using appropriate technology
While ASIC considers that hybrid AGMs are permitted under the Corporations Act, there is more doubt over the permissibility of resolutions passed at virtual AGMs under the current Act. ASIC has no power to modify the Corporations Act.
So, even though ASIC has taken a temporary ‘no action’ position on the hosting of virtual AGMs, listed entities need to consider whether hybrid or virtual AGMs are allowed under their own company constitution – and seek legal advice is advised in instances where a company is unsure.
Visit ASIC’s website to read the updated guidelines in full.
The trend in Australia
Technology is already opening up annual meetings to a wider pool of investors. Research by Link Administration Holdings found that physical meetings only attracted 0.2% of shareholders in an analysis of 1,800 meetings held during 2019 in Australia. In addition, the latest Australasian Investor Relations Association (AIRA) benchmarking report revealed 4% of survey respondents conducted virtual AGMs for the first time, while the number of hybrid AGMs increased. Electronic voting at AGMs also increased, according to the survey.
But the latest guidelines could accelerate the technology adoption rate with many companies whose constitution allows for direct voting but who were yet to embrace virtual and hybrid AGMs.
Pros and cons
In considering the options, we have outlined our thoughts on the pros and cons of a virtual AGM for shareholders and companies?
- Access: Through technology all shareholders have the opportunity to ‘virtually’ attend and participate in annual meetings, no matter where in the world they live. With replay facilities, shareholders who can’t attend a meeting physically or digitally at the allotted time and place, are still able to listen to updates in their own time.
- Cost: Online AGMs may be a more cost-efficient method of engaging with shareholders, as money will be saved on room rentals, printing and catering.
- Restricting shareholders’ physical access to AGMs may limit the robustness of discussions and don’t give shareholders an opportunity to meet directors face to face. Some critics have suggested virtual only AGMs may give companies the ability to ‘silence’ dissenting shareholders at the click of a button or ignore questions they would prefer not to answer.
- While live voting may be convenient for the shareholder, it poses potential issues for companies who rely on advance and proxy voting as an indicator of the likely voting outcomes of their resolutions, enabling them to be prepared and engage with shareholders in advance of the AGM.
Next week, we will discuss our recommended top five considerations for companies pursuing virtual or hybrid AGMs.