Corporations Act must move out of the 19th century
Pandemic-inspired amendments to the Corporations Act must be made permanent as Australia emerges from coronavirus.
In early May, modifications were made to the Corporations Act to allow virtual AGMs, electronic execution of documents by company officers and providing notices of annual general meetings for a six-month period.
“Under the social distancing measures that are currently in place, it is difficult for shareholders to physically gather with members of the board at annual general meetings. Meetings must continue to provide shareholders with a reasonable opportunity to participate,” Treasurer Josh Frydenberg said at the time.
At the time, the Governance Institute of Australia welcomed the changes, saying they would deliver some certainty for many companies planning their annual reporting to shareholders this year.
“Many organisations have been facing significant hurdles recently including restrictions on their ability to use technology to hold meetings, communicate with their shareholders, or use electronic signatures on documents – as required under the nearly 20-year-old legislation,” Governance Institute CEO Megan Motto said.
Now, the Governance Institute is calling for those pandemic-inspired amendments to the legislation to be made permanent.
“Prior to recent modifications to the Corporations Act, many companies were struggling to organise their shareholder meetings in accordance with the law as well as the COVID-19 distancing requirements. Many were also scrambling to execute hard-copy legal documents,” it said in a statement.
“However, these measures enabling companies to hold virtual AGMs and execute documents electronically are due to expire on 6 November 2020. With around 970 listed companies normally holding their AGM after this expiry date, businesses are looking for certainty.
“When COVID-19 struck, we saw so many organisations struggling to operate under laws that do not contemplate the use of technology. These recent changes are important, pragmatic and sensible – but they need to be made permanent.
“These changes should form the basis for more permanent reforms that apply after the pandemic restrictions are lifted as they address [long-standing] issues that impact the ability of companies to operate effectively and efficiently.
“The [government] should make the most of this valuable reform opportunity to ensure Australia’s corporate regulatory infrastructure is certain, coherent and fit for purpose.”
The Governance Institute has recommended that the Corporations Act be permanently amended to provide companies with the option to use technology to hold virtual or hybrid meetings; allow companies to digitally engage with their shareholders by providing that shareholders who fail to opt in to receive their notices of meeting by mail or email are deemed to receive them if the company makes them universally available on their website; and enable companies to execute documents electronically
“The Corps Act is currently stuck in the 19th century when the world operated in hard copy,” Ms Motto said.
“We have seen some updates over the years but key provisions of the legislation still do not allow for the use of technology and will serve to hold back business, and Australia’s post-pandemic recovery.”