Introductory Info

Date introduced: 20 October 2021
House: House of Representatives
Portfolio: Treasury
Commencement: Schedule 1 commences the day after the Bill receives Royal Assent. Schedule 2 commences on the later of immediately after the commencement of Schedule 1 or 1 April 2022.

Purpose of the Bill

The purpose of the Corporations Amendment (Meetings and Documents) Bill 2021 (the Bill) is to amend the Corporations Act 2001 (the Act) to:

• allow companies to use technology to execute company documents such as contracts and deeds and to also sign meetings-related documents and provide those to their members and
• allow companies and registered schemes to hold hybrid meetings (which give members the option of either attending in person or remotely).

Structure of the Bill

The Bill has two Schedules. Schedule 1 deals with the use of technology to execute and sign various company documents. Schedule 2 deals with the proposed changes to how companies and registered schemes may hold meetings, also with the use of technology.

Background

On 5 May 2020, Treasurer Josh Frydenberg used his temporary instrument-making power under the Act to issue a determination that temporarily allowed companies and registered schemes to use technology to satisfy their obligations relating to meetings and document execution.

Whilst the determination expired on 21 March 2021[1] the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (the 2021 Act) ensured that the changes made by the determination remained available to companies and registered schemes throughout the COVID-19 pandemic and associated global crisis and formed part of the Government’s plan to ‘secure Australia’s future’.[2] The changes made by the 2021 Act expire on 31 March 2022.[3] Further information about the 2021 Act can be found in the relevant Bills Digest.[4]

Consultation

The Bill is the result of three rounds of exposure draft legislation and Treasury consultations.[5] The first commenced in October 2020.

On 17 February 2021, the Government announced its intention to make permanent the temporary changes relating to the execution of company documents and the electronic communication of meetings-related materials noted above. It also announced that it would conduct a 12-month review of annual general meetings of companies and registered schemes.[6]

That announcement was followed by the second consultation process on a revised exposure draft in June 2021. The third and final exposure draft and consultation process took place in August and September 2021.

Committee consideration

Senate Economics Legislation Committee

The Bill was referred to the Senate Economics Legislation Committee for inquiry and report by 18 November 2021. The majority of submissions made to the Committee supported the proposed amendments. It was generally agreed:

the provisions would generally benefit the sector and allow greater flexibility and efficiency in managing the flow of documents and the undertaking of meetings while delivering savings through the greater use of electronic communications.[7]

The Committee recommended that the Bill be passed.[8] The Opposition Senators issued additional comments, expressing concern about wholly virtual meetings of members and recommending that an independent review of the Bill be conducted within two years of its commencement, focusing on the ability of shareholders to participate in meetings and hold directors to account.[9]

The Australian Greens Senators also issued additional comments, recommending that ‘provisions allowing for entities to conduct wholly virtual AGMs be opposed’.[10]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills raised concerns about proposed subsection 110C(5) (at item 2 of Schedule 2 to the Bill), which enables Regulations to modify the operation of Act with regards to the proposed changes allowing the technology-neutral sending of documents (that is, it is akin to a ‘Henry VIII’ clause).[11] Those concerns are examined below in relation to the relevant provision.

Policy position of non-government parties/independents

As noted above:

• the Opposition supports the Bill but recommended a review be conducted regarding the impact of wholly virtual meetings of members within two years of the commencement of the measures and
• the Australian Greens recommended that provisions enabling wholly virtual meetings of members be opposed.

At the time of writing the position of other non-government parties and independents on the specific measures contained in the Bill could not be determined.

Position of major interest groups

Most stakeholders either supported the Bill in its current form,[12] supported the underlying intention of the reforms,[13] or supported specific reforms contained in the Bill.[14]

Key reforms that attracted criticism from some stakeholders included:

• allowing meetings of members to be held by virtual means only[15] and
• imposing a requirement that members be able to participate in meetings both orally and through written communications.[16]

The Business Law Section of the Law Council of Australia was generally supportive, with some reservations, such as: 

we have a concern about the drafting of proposed subsection 110E(8) in relation to when elections to be sent documents will operate when there is a “voluntary” general meeting of members, and it is at least arguable that the Corporations Act does not “require” a document to be sent by any given date because the company or scheme can choose when the meeting is to be held.[17]

Financial implications

The Explanatory Memorandum notes that the Bill will not have any financial impact on the Commonwealth. It further notes that the measures will result in average compliance cost savings of $450 million per year over ten years for impacted entities.[18] 

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible with human rights.[19]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[20]

Key issues and provisions: signing and executing documents 

The amendments in Schedule 1 of the Bill will allow for the electronic execution of company documents and deeds. It will also allow companies, registered schemes and disclosing entities to sign and provide meetings-related documents electronically.

Previous law regarding signing and execution of documents

Prior to the temporary changes made by the 2021 Act, the Act provided:

• to sign a company document or execute a company deed, all persons must physically sign the same hard copy[21] and
• additional rules apply in relation to the execution of a document as a deed.[22]

Current temporary measures relating to signing and execution of documents

As noted in the Background section above, the 2021 Act introduced temporary changes in relation to the signing and execution of documents under the Act that expire on 31 March 2022.[23] Those temporary changes mean that, currently, company documents executed both with and without a seal may be executed using electronic means. If the document is executed by fixing a company seal, electronic means may be used to witness the fixing of the seal.[24]

Proposed changes

Item 1 of Schedule 1 of the Bill inserts proposed Part 1.2AA – Signing documents into the Act, consisting of proposed sections 110 to 110B. The measures contained in item 1 will apply 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
• any document specified in the Regulations and
• documents lodged with ASIC.[25]

Technology neutral signing of documents

Proposed section 110A provides that a person may sign documents of the type noted above in electronic or physical form, provided it satisfies the requirements set out in the section, namely:

• it must be signed in the appropriate manner
• the method of signing satisfies the identification, reliability and intention requirements.[26]

In relation to the appropriate methods of signing, where a physical document is signed, it must be signed by hand and where an electronic document is signed, it must be signed by electronic means.[27]

The method of signing must identify the person signing the document.[28] The method of signing must also be:

• ‘as reliable as appropriate for the purpose for which the information was recorded, in light of all the circumstances, including any relevant agreement’ or
• ‘proven in fact’ to have fulfilled the functions of identifying the person and their intention with respect to the information in the document they signed ‘by itself or together with further evidence’.[29]

The method of signing must also indicate the person’s intention in respect of the information recorded in the document they signed.[30]

Mixture of signing methods permitted

The Bill repeals the existing rules in the Act regarding signing documents and inserts new provisions that will allow a mixture of signing and execution methods.[31] This will mean that (for example) whilst the physical and electronic counterparts of a document must include the same entire contents, each copy need not include the signatures of other signatories.[32]

This change will allow each signatory to execute the document using different methods (for example, one director physically signs while the other signs electronically).[33]

Signing in different capacities

A person can sign documents in different capacities. For example, they could sign a contract as the director of one company and the company secretary or agent of another. Where a person is required or permitted to sign a document in more than one capacity, they are then treated as a different person in each capacity. This means that, currently, a person may be required to sign a document twice, once in each capacity.

Proposed section 110A(5) will allow a person to sign the document in one or more of these capacities by signing the document only once, provided:

• the document requires or permits them to do so and
• states the different capacities in which the person is signing the document.

New signing process

The amendments to sections 126 and 127 clarify that documents can be signed and executed in a technology neutral manner as per proposed Division 1 of Part 1.2AA discussed above.[34]

Changes to how deeds can be executed

Under the common law a deed must be written on parchment, vellum, or paper, signed, sealed and delivered.[35] In summary, a deed is signed when the individual signs the deed or affixes their mark to it.[36] A deed is sealed when:

• a seal is affixed, attached or impressed upon the deed and
• the party to be bound by the deed must perform some act by which he or she expressly or impliedly acknowledges the seal to be his or hers.[37]

The third common law requirement is that a deed must be ‘delivered’ before it is binding. Under the common law, delivery is said to have occurred where there are acts or words sufficient to show that the party making the deed intends the deed to be binding on them.[38] Whilst no form of words or conduct is mandated to give effect to delivery, traditionally:

intention to be bound by the deed was indicated by handing over the deed and saying ‘I deliver this as my deed’, but any other words or conduct which show it was intended that the deed be finally executed and the maker of the deed bound by it, will suffice.[39]

The Bill provides that, by following the process outlined in sections 126 or 127 of the Act as amended by the Bill, companies do not need to follow the established common law process for signing, sealing and delivering a deed set out above. Instead, under the Bill:

• a document or deed does not need to be delivered to be validly executed as a deed and[40]
• where a document or deed is executed by signature, the signature does not need to be witnessed, or made on paper or parchment or vellum to be valid.[41]

Current requirements regarding witnessing execution of documents and deeds

Under section 123 of the Act, a company can elect to have a common seal (it is not mandatory to have one). Traditionally a company seal is used to impress the mark of the company on a document as authorisation or agreement.[42] That is, affixing a company seal on a document has an effect similar to a natural person signing a document.[43]

Currently, a person dealing with a company can, in the absence of actual notice or suspicion to the contrary, make certain assumptions which, in relation to the use of a company seal, include assuming that a document has been properly executed by a company where:

• 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.[44]

Currently, subsection 127(2) provides that a common seal may execute a document if:

• the seal is fixed to the document and
• the fixing of the seal is witnessed by appropriate persons (directors of the company and/or a company secretary).[45]

In essence, where the above is satisfied and where a signature appears above the word 'director' or 'secretary’ or a company seal appears to have been properly fixed and witnessed (as the case may be), individuals can rely on the document without needing to make any enquiry, and without checking the appointment or name of the director or the veracity of the signature.[46]

In general, the above reflects a conscious policy decision for decades that where an outside party (without actual notice or suspicion to the contrary) deals with a company in good faith it is the company that bears the risk of invalid, forged or unauthorised signature or company seal, not the outside party.[47]

Fixing of common seal can be witnessed remotely

Proposed subsection 127(2A) (at item 9 of Schedule 1) will allow, for the purposes of existing subsection 127(2), the fixing of a company seal and execution of a document via that seal, to be witnessed remotely by electronic means where the witness:

• observes by electronic or other means the fixing of the seal and
• signs the document and
• a method is used to indicate that the person observed the fixing of the seal to the document.

Whilst this will allow for a more flexible and hybrid approach to the execution of documents with a company seal, as discussed below the Bill will remove the requirement for the execution of certain documents to be witnessed.

Removal of requirement to have the execution of certain documents witnessed

The Bill will remove some of the requirements regarding witnessing of the execution of certain documents. It does this by allowing:

• an agent or a company to execute a document or deed without a company seal and
• a document to be executed as a deed without the execution being witnessed, regardless of whether the document is in physical or electronic form.[48]

The execution of a document with a common seal other than as a deed would still require the document to be witnessed.[49] However, in contrast under the Bill, a document could be executed as a deed in either physical or electronic form without a company seal and therefore without the requirement that the execution be witnessed.[50]

Key Issue: risks posed by not having document witnessed?

The purpose of having the execution of documents and deeds witnessed is to provide a witness who can be called to prove execution if there is a dispute.[51] That is, the current requirement that the execution of documents and fixing of a company seal to a deed be witnessed are an integrity measure designed to ensure that company documents are used appropriately and not fraudulently.[52]

As such, the changes proposed by the Bill would appear to potentially increase the risk of fraud. This risk was noted in the Explanatory Memorandum:

Some stakeholders raised concerns about fraud in using electronic means to execute documents. In theory, a person may execute a document without appropriate authority. However, whether this is done electronically or physically, such an execution will not be valid and could entail criminal consequences depending on the circumstances. However, initial stakeholder feedback has indicated that the same methods used to confirm that a company officer has in fact physically signed or witnessed the application of a seal to a document under current law, can be used to confirm that a company officer has done so electronically. Furthermore, the use of electronic technologies is more likely to leave an audit trail, if required.[53]

Whilst it appears that electronic technologies can be used to at least partially ameliorate the risks proposed by the reforms, it appears that the reforms increase the risks posed by fraud in relation to hard-copy documents by removing a long-standing integrity measure designed to ensure that company documents are used appropriately and not fraudulently in relation to the witnessing of the execution of deeds. In that regard, however, the Explanatory Memorandum notes:

The reforms will allow company agents to execute a deed without a witness. Traditionally witnessing the execution of a deed in this way would require physical signing and witnessing of the document. The requirement has been removed to facilitate technology neutral signing and was informed by consultation with stakeholders. Stakeholders stated that the witnessing requirement provided little, if any, certainty about the execution of the document as any person may be a witness (they do not have to be known to the party) and there are no requirements for the witness to know the signer or satisfy themselves as to the signer’s identity.[54]

Changes to how sole-director proprietary companies can sign and execute documents

Currently, in relation to sole-director proprietary companies, where the director is also the sole company secretary, section 127 of the Act only provides a mechanism for valid document execution if:

• the document is physically signed by that director or
• the common seal of the company is fixed to the document and the fixing of the seal is physically witnessed by that director.[55]

The Bill will make available the new signing, execution and witnessing mechanisms discussed above available to proprietary companies with a sole director and no separate company secretary. It does this by providing that, 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.[56]

Other provisions related to documents

The Bill makes consequential amendments to section 129 (which deals with the assumptions that persons dealing with a company can make in relation to documents) reflecting the above amendments.[57]

Application of amendments related to documents 

Proposed section 1687A (at item 19 of Schedule 1) provides that the amendments in Schedule 1 apply to documents which are signed or executed on or after the day that the Schedule commences, which will be the day after Royal Assent.

Key issues and provisions: company meetings and sending of documents

The amendments in Schedule 2 of the Bill apply to companies, registered schemes and disclosing entities.

Importance of meetings

The Act provides that the business of a company is to be managed by, or under, the direction of the directors.[63] The Act effectively imposes similar requirements regarding registered schemes with the requirements that the scheme is managed by the responsible entity and that investors do not have day-to-day control over the operation of the scheme.[64] Importantly, however, registered schemes are not required to hold annual general meetings in the same manner as (for example) public companies.[65]

Directors are accountable to members, in the sense that they are required to report to members and the members in general meeting have the power to remove them from office. An important issue of corporate governance is whether the directors are sufficiently accountable to members, and conversely whether members are adequately able to bring the directors to account.

Company and registered scheme meetings are formal gatherings of company and scheme members that represent a critical decision‑making and accountability process. As such, they – and the information members receive in relation to them – are critical aspects of corporate governance.[66]

Types of documents provided before meetings

In general, before a members’ meeting is held the company or registered scheme must provide several documents including:

• notice documents (including notices of resolutions and the agenda)
• various reports (annual financial report, directors’ report, auditor’s report and potentially others (such as a remuneration report)).[67]

Previous law regarding meeting-related documents

Prior to the temporary changes made by the 2021 Act, the Act provided:

• documents relating to a meeting had to be posted unless the member agreed to the document being sent via email or fax and the specific requirements in the Act were met[68] (however some types of documents could only be provided via post[69]) and
• meeting-related documents and minutes were generally required to be signed in hard copy.[70]

Current temporary measures relating to meeting-related documents

As noted in the background section above, the 2021 Act introduced temporary changes in relation to the sending of meeting-related documents under the Act that expire on 31 March 2022. Those temporary changes mean that currently:

• members of companies and registered schemes can elect various mechanisms by which to receive meeting-related documents
• companies and registered schemes can hold wholly virtual meetings of members, regardless of the requirements in their constitutions and
• votes on all resolutions at a physical meeting of a company or registered scheme’s members are decided on by a show of hands unless a company’s constitution provides otherwise and if the meeting is held using technology, the default method for voting is a poll.[71]

Proposed changes

The measures contained in Schedule 2 of the Bill will:

• allow members of companies and registered schemes to continue to elect to receive meeting-related documents electronically or in hard copy
• allow companies and registered schemes to hold ‘hybrid’ meetings of members, that is, holding such meetings in one or more physical locations and/or using technology or, if permitted by the entity’s constitution, wholly virtual meetings
• provide that a member or group of members of a company or registered scheme with at least 5% of the votes can request to have an independent person appointed to observe and/or prepare a report on a poll conducted at a members’ meeting and
• provide that votes on resolutions which are set out in a notice of a meeting of members of a listed company or listed registered scheme must be decided by poll, and also provide that a listed company’s constitution cannot provide otherwise (that is, a constitution cannot provide that such resolutions can be decided on a show of hands).[72]

Types of meetings and documents captured by the changes

The proposed changes in relation to meetings and the sending of documents related to meetings will apply to meetings of:

• shareholders of companies and
• members of registered schemes.[73]

The changes proposed by the Bill will apply 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 or specified in the Regulations.[74] However, it will not apply to documents which are sent to ASIC or the Registrar.[75]

Scrutiny Committee concerns

The Senate Standing Committee for the Scrutiny of Bills raised concerns about proposed subsection 110C(5), which enables regulations to modify the operation of proposed Division 2 of Part 1.2AA of the Act (that is, it is akin to a ‘Henry VIII’ clause).[76] It noted that the Bill allows certain entities to give listed documents to a person electronically or in physical form and that proposed subsection 110C(5) provides that the regulations may modify which documents can be sent to a person electronically or in physical form by the entities captured by proposed changes.[77] The Committee then noted:

The committee has significant scrutiny concerns with Henry VIII-type clauses, as such clauses impact on the level of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the executive. Consequently, the committee expects a sound justification to be included in the explanatory memorandum for the use of any clauses that allow delegated legislation to modify the operation of primary legislation… While noting the explanation in the explanatory memorandum, the committee has not generally accepted a desire for administrative flexibility to be a sufficient justification for allowing delegated legislation to modify the operation of primary legislation. The committee notes that delegated legislation, made by the executive, is not subject to the same level of parliamentary scrutiny inherent in bringing proposed changes in the form of an amending bill.[78]

Members can elect how to receive documents

The Bill aims to facilitate member choice regarding how (and if) they receive documents by providing that a member may elect to receive or not receive documents in physical form or electronically. The election can:

• apply to all documents or specified classes or types of documents (a standing election) or
• to a single specified document (an ad hoc request).[79]

A failure to take reasonable steps to provide documents to a member in the elected format or to avoid sending a document to a member who has made an election not to be sent a document is a strict liability offence with a maximum penalty of 30 penalty units ($6,660).[80]

In addition, a public company, responsible entity of registered scheme or disclosing entity must at least once per year, notify members of their right to:

• elect to receive a document in a specified form (physical form or electronic form)
• request that a particular document be provided in a specified form
• request not to receive specified documents.[81]

The annual notice can be given in writing and sent to the members, or alternatively published on the company or share registry’s website.[82] A failure to notify a member of their right to make an election is a strict liability offence attracting a maximum penalty of 30 penalty units ($6,660).[83] 

How can documents be sent?

In addition to facilitating member choice regarding how (and if) documents are to be received, the Bill also aims to facilitate technology neutral options for the sending of documents. It does this by permitting documents to be provided to members by:

• sending the document in physical form
• electronic means (such as email – subject to certain requirements discussed below)
• providing the member, in physical or electronic form, sufficient details to allow them to view or download the document electronically (for example, sending a link to a website) or
• in any other way permitted by specific provisions in the Act that provide how a particular type of document can or must be sent to a member or in a way which is set out in a company’s constitution (discussed below).[84]

Proposed subsection 110D(2) provides that a document can only be given electronically where it is reasonable to expect it will be readily accessible by the member so as to be ‘useable for subsequent reference’.

Whilst the above involves the direct ‘sending’ of a document or information allowing members access to a document, the Bill also allows for certain documents to be deemed to have been sent to members. Proposed subsection 110D(3) provides that annual reports, directors’ reports, auditor’s reports and other reports captured by section 314 of the Act or prescribed in the Regulations are taken to be ‘sent’ to a member where they are made readily available on a website. The Explanatory Memorandum notes:

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.[85]

Issue: members may never be directly sent notices or documents

Prior to the 2021 Act amendments the Act provided that a company, registered scheme or disclosing entity was deemed to have ‘sent’ the relevant reports captured by section 314 by making them readily available on a website, but only where they directly notified, in writing, relevant members that the documents were accessible on the specified website.[86]

The Bill does not impose a similar requirement. Whilst there is an annual obligation to notify members of their right to elect to receive a document in a specified form (physical form or electronic form), as noted above that obligation can be satisfied by publishing a notice on the company or share registry’s website.

This means that under the Bill it is possible for a public company, responsible entity of a registered scheme or disclosing entity to never directly send relevant annual reports to a member or notices informing them of their right to elect how (or if) to receive such documents.

Holding members’ meetings

As noted above, the Bill proposes to make permanent changes to how companies and registered schemes can use virtual meeting technology to hold different types of meetings.

Using technology for directors’ meetings

The Bill will allow a directors’ meeting to be called or held using any technology consented to by all the directors (that is, there must be unanimous agreement). The Bill also provides that such consent can be given as a standing consent, and any consent (standing or otherwise) can be withdrawn within a reasonable period before a meeting.[87]

Using multiple venues and technology for meetings of members

Virtual meeting technology is defined flexibly in the Act as ‘any technology that allows a person to participate in a meeting without being physically present at the meeting’.[88] The Bill builds on that definition by seeking to allow companies, registered entities and body corporates registered under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act) to hold meetings of members:

• at one or more physical venues
• at one or more physical venues and using virtual meeting technology or
• using virtual meeting technology only if this is expressly required or permitted by the company’s constitution.[89]

That is, it will allow companies, registered schemes and body corporates registered under the ACNC Act to hold ‘hybrid’ meetings of members. However, it will only allow fully virtual meetings where the constitution of the company expressly requires or permits that to occur.

Stakeholder views on wholly virtual meetings

The appropriateness of wholly virtual meetings of members was an issue of division among stakeholders with some supporting it[90] and others opposing it.[91]

Deemed presence at meetings and quorum requirements

As noted earlier in the Digest, meetings are an important aspect of corporate governance.[92] A quorum is the minimum number of persons required to be present at a meeting in order that the business of the meeting can be validly carried out.[93] In summary:

• for a meeting of the members of a company or registered scheme this is either two members or any other quorum specified in the constitution of the company or registered scheme who are present at all times during the meeting[94] and
• for a directors’ meeting, unless the directors determine otherwise, the quorum is two directors who are present at all times during the meeting.[95]

The Bill provides that all persons participating in a meeting (regardless of whether physically present or using electronic means) are taken to be ‘present’ at the meeting.[96] The effect of this is that all persons attending virtually at the time that the quorum is determined must be counted for the purposes of determining whether there is a quorum.[97]

Place and time and presence at meetings

Under the Act, meetings are held at a specified time and place.[98] The time when the meeting commences (specified in the relevant notice calling or advising members of the meeting) is important as a quorum must be present within 30 minutes after the time the meeting is specified as commencing, otherwise the meeting is adjourned.[99]

As the Bill allows meetings to be held in multiple physical locations and via technology, it contains rules for determining the place and time of a meeting. The rules provide clarity as to the precise time and place of multi-venue or hybrid meetings (that is, a meeting that combines a physical meeting with the use of virtual meeting technology). These rules are summarised in the table below.

Table 1:     Deemed place and time of meetings

Type of meeting	Deemed place of meeting	Deemed time of meeting
Single site physical meeting or hybrid meeting with a single physical meeting site.	Physical venue for the meeting.[100]	Time at the physical venue for the meeting.[101]
Multi-venue physical meeting or hybrid meeting with multiple physical meeting sites.	The main physical venue as set out in the meeting notice sent to members.[102]	Time at the main physical venue for the meeting, as set out in the meeting notice sent to members.[103]
Virtual only meeting.	Registered office of the company or responsible entity.[104]	Time at the registered office  of the company or responsible entity.[105]

Source: as per footnotes in table above. 

Reasonable opportunity to participate

The Bill provides that the members of a company or registered scheme, as a whole, must be given a ‘reasonable opportunity’ to participate in the meeting.[106]

The Bill includes a non-exhaustive list of factors that a court can consider when determining if members were given a reasonable opportunity to participate in a particular meeting, including the time the meeting is held. This is set out in the table below.

Table 2:     Determining whether members had a reasonable opportunity to participate in a meeting

Type of meeting	Time for the meeting	Other specific factors	Notes
Single site physical meeting or hybrid meeting with a single physical meeting site.	Must be held at a time that is reasonable at the physical venue.[107]	Both: the physical venue is reasonable[108] and the technology used to hold the meeting must be: reasonable and allow members to exercise any rights orally and in writing.[109]	The reasonableness of a physical venue can be determined by reference to where the: company or registered scheme is registered its members reside or the directors are located.[110]
Multi-venue physical meeting or hybrid meeting with multiple physical meeting sites.	Must be held at a time that is reasonable at the main physical venue (as set out in the meeting notice sent to members).[111]	Both: the main venue (as set out in the meeting notice sent to members) must be reasonable and  the technology used to hold the meeting must be: reasonable and allow members to exercise any rights orally and in writing.[112]	Reasonableness of the main physical venue can be determined by reference to where the: company or registered scheme is registered members reside or directors are located.[113]
Virtual only meeting.	Must be held at a time that would be reasonable at any physical venue where it would have been appropriate to hold the meeting.[114]	The technology used to hold the meeting must be: reasonable and allow members to exercise any rights orally and in writing.[115]	Technology must allow members to vote.[116]

Source: as per footnotes in table above.

Stakeholder views on members exercising rights orally or in writing at meetings

A small number of stakeholders argued against imposing a requirement that members be able to participate in meetings orally and through written communications.[117] For example, the Australian Institute of Company Directors stated:

We note however that the Bill also proposes to include a new requirement in section 249S(8) that shareholders or members may be able to exercise their right to speak or ask questions at a meeting orally and in writing throughout a meeting. We would caution against hardwiring any requirement for both oral and written communication from shareholders or members throughout a meeting.[118]

Most stakeholders either supported the proposed requirement that technology must allow members to exercise any rights orally and in writing[119] or did not address the issue. For example, the LCA noted that it supported ‘ensuring that members have the right to ask questions and make statements at the virtual component of meetings orally as well as in writing’ and the Australasian Centre for Corporate Responsibility noted:

The Bill should require companies to provide both phone and online access to allow members to ask questions verbally or in writing.[120]

Consequences where members’ meetings are unreasonable

No penalty applies where members do not have a reasonable opportunity to participate in a meeting. However, the Bill provides that a court may declare that a meeting is invalid (and also hence any decisions made, or resolutions passed at it would also be invalid) where:

• 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.[121]

How decisions are made at meetings

As noted above, formal gatherings of company and scheme members are critical decision‑making and accountability aspects of corporate governance.[122] Decisions at meetings are made by members voting on various resolutions.[123] This includes the appointment of directors, auditors and in some cases, approval of a remuneration report.[124]

Decision making at such meeting is based on voting, either by a show of hands or by a poll, but different counting mechanisms apply to each. Generally, a vote conducted on a show of hands is based on each member having one vote (even if they own more shares than another member).[125] In contrast a poll is conducted based on each member having a one vote per share held for a company, or one vote for each dollar of the value of the total interests they have in the scheme, for a registered scheme.[126]

Those general rules are subject to various exceptions, such as the requirement that a special resolution at a meeting of a registered scheme’s members must be decided on a poll or where virtual meeting technology is being used to hold the meeting.[127]

In addition, the Act provides that a poll must be held when ‘demanded’ in certain situations including but not limited to:

• when demanded by at least five members entitled to vote on the resolution
• when demanded by members with at least 5% of the votes that may be cast on the resolution or
• when demanded by the chair.[128]

Resolutions that must be put to a poll

As noted above, currently under the Act, the default decision-making process for a physical meeting is a show of hands. Further, a poll will only be conducted when demanded in certain circumstances or in relation to certain specified types of resolutions.[129]

The Bill changes and expands the types of resolutions that must be decided by a poll and narrows the circumstances in which a show of hands is the default manner by which resolutions are to be determined.

Types of resolutions that must be decided by poll

Currently, subsections 250J(1) and 253J(2) of the Act provide the default position for deciding most resolutions put to a meeting of company or registered scheme members (respectively). This is by a show of hands, except where a poll is demanded or where virtual meeting technology is used to hold the meeting. The Bill provides that the following types of resolutions must be decided at a meeting of a listed company or listed registered scheme members by poll:

• where the notice of the meeting set out an intention to propose the resolution and stated the resolution[130] or
• where the listed company or listed registered scheme gave notice of a resolution proposed by members in accordance with the Act.[131]

The Explanatory Memorandum notes:

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.[132]

The Bill also provides that any other resolution at a meeting of listed company members must be determined by poll where one is demanded, despite anything in the company’s constitution.[133] In contrast, in relation to listed registered schemes the Bill instead provides that any resolution (other than the types noted above) at a meeting of listed company members may be determined by a show of hands unless a poll is demanded.[134]

Narrowing of when show of hands is the default voting mechanism

As noted above, currently subsections 250J(1) and 253J(2) of the Act provide the default position for deciding most resolutions put to a meeting of company or registered scheme members (respectively) is a show of hands. Items 15 and 26 of Schedule 2 amend those subsections to provide that in general, a resolution put to the vote at a meeting ‘may be decided on a show of hands unless a poll is demanded’.

When considered in the context of the amendments expanding the types of resolutions that must be decided by a poll at a meeting the effect of this is to somewhat narrow the types of resolutions for which a show of hands is the default mechanism for determining votes, as well as removing the specific requirement to conduct polls in circumstances where they were not demanded (for example, when virtual meeting technology is used to conduct the meeting).

In that regard, the proposed change must be viewed in the context of the reasonableness requirements discussed above in relation to meetings where virtual meeting technology is used. The Bill requires that members must be allowed to exercise any ‘rights’ orally and in writing, which the Explanatory Memorandum notes includes voting.[135] It appears that this means virtual meeting technology must facilitate voting by both a show of hands and by poll if it is to meet the reasonableness requirements, or risk the meeting being declared invalid by a Court.

Other amendments

The Bill makes a number of consequential amendments relating to the conduct of votes by both a show of hands and by poll, including:

• that companies are required to record the details of members and proxies voting on polls in all polls which are required (whether demanded or on a meeting notice paper)[136] and
• providing that proxies with two or more appointments who have received conflicting instructions on how to vote from appointees cannot vote by show of hands.[137]

Independent reports on polls

As noted above, meetings (and hence voting processes at meetings) are a critical decision-making process and aspect of corporate governance.

Currently, under the Act when a poll is taken there is no requirement or possibility of the conduct of the poll and its result being independently observed and reported. Instead, the conduct of a poll and any reporting on it is a matter for the relevant company or registered scheme and is usually conducted by its officers, employees, or agents.[138]

The Bill proposes to allow, in certain circumstances, members of listed companies and registered schemes to 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. Where the company or registered scheme fails to take reasonable steps to comply with the request, penalties can apply.

When can members request the appointment of an independent poll observer?

A member or members with at least five per cent of the votes may request, in writing, that an independent person be appointed to:

• observe and report on the conduct of a poll at a specific meeting or
• scrutinise and report on the outcome of a poll conducted at a specific meeting.[139]

The request must be made no later than:

• five business days before the meeting or
• if the request relates to a report on the outcome of a poll, before the meeting is held or up to five business days after the meeting.[140]

Company must take reasonable steps to comply with request

The Bill provides that a company or responsible entity of a registered scheme must take ‘reasonable steps’ to appoint an independent person after receiving a valid request to either observe and report on the conduct of a poll or scrutinise and report on the result of a poll already conducted.[141]

When observation and reporting is requested

Where the request relates to observing a poll that will be conducted at a specific meeting, the company or responsible entity must take ‘reasonable steps’ to ensure that:

• the independent person observes the poll
• the independent person prepares a report on the conduct of the poll and
• a copy of the report is made readily available to members within a ‘reasonable time after the request is received’.[142]

When scrutiny and reporting is requested

Where the request relates to scrutinising and reporting on a poll that was conducted at a specific meeting, the company or responsible entity must take ‘reasonable steps’ to ensure that:

• the independent person scrutinises the outcome of the poll conducted at the specified meeting
• the independent person prepares a report on the outcome of the poll and
• a copy of the report is made readily available to members within a ‘reasonable time after the request is received’.[143]

When is a person ‘independent’?

The Bill provides that a person is independent (and can therefore be appointed for the purposes discussed above) where they are:

• ‘independent of the company or registered scheme’[144] or
• is an auditor or registry service provider (including of the company concerned) unless the ‘relevant poll concerns an issue or matter relating to the person’.[145]

Powers of the independent person

The Bill provides independent persons appointed for the purposes discussed above may request information from the company or responsible entity if they reasonably consider it is information that is necessary for the scrutiny of a poll, preparation of the report or observation of a poll.[146]

Consequence for failing to appoint an independent person or provide information

Where the company or registered scheme fails to take ‘reasonable steps’ to comply with a request to appoint an independent person it commits a strict liability offence attracting 40 penalty units ($8,880).[147] Likewise where the company or registered scheme fails to take ‘reasonable steps’ to comply with a request for information from an independent person it commits a strict liability offence also attracting 40 penalty units.[148]

The Explanatory Memorandum states that a company or responsible entity will not be required to provide the independent person with information where the document is privileged or would incriminate its directors as ‘the Bill does not alter any fundamental common law rights’.[149] In relation to the offences, the Explanatory Memorandum notes:

Strict liability offences are appropriate in this circumstance, as it is necessary to strongly deter misconduct that can have serious detriment for members. 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.

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.[150] 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.[151]

Record-keeping on poll reports

The company or responsible entity must keep a record of the report prepared by the independent person. Where it fails to do so, a strict liability offence attracting a maximum penalty of 40 penalty units applies.[152] The Explanatory Memorandum notes this requirement is ‘in line with the requirements for keeping a record of meeting minutes’.[153]

Commencement

The amendments in Schedule 2 apply to meetings of members or directors which are held and to documents sent on or after Schedule 2 commences, which will be the later of the day after Royal Assent or 1 April 2022.[154] The latter date is the day after the temporary measures in the 2021 Act expire on 31 March 2022.

Other provisions: review of the Act

The Bill provides that 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 Schedule 1 to the Bill commences.

The report must be tabled in Parliament within 15 sitting days after it is given to the Treasurer.[155]

Concluding comments

The Bill is a set of incremental reforms that, with the exceptions of permitting wholly virtual meetings and requiring that members can exercise meeting rights both verbally and in writing, appear to have widespread support among a range of diverse stakeholders.