Referral of the inquiry
1.1
The Corporations Amendment (Meetings and Documents) Bill 2021 (the bill) was introduced in the House of Representatives and read a first time on
20 October 2021.
1.2
On 21 October 2021, the Senate referred the provisions of the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 18 November 2021.
Purpose of the bill
1.3
The bill seeks to amend the Corporations Act 2001 (the Corporations Act) to create a permanent statutory mechanism to replace a temporary determination for regulatory relief measures put in place by the government as part of its response to the COVID-19 pandemic in 2020.
1.4
Prior to the temporary determination, companies were restricted in their ability to use different technologies to comply with the requirements related to document execution and meetings, respectively found under section 127 and Chapter 2G of the Act.
1.5
The current temporary relief mechanisms will expire on 31 March 2022.
1.6
The Assistant Treasurer, the Hon Mr Sukkar, stated in his second reading speech that the purpose of the bill is to 'make permanent the ability for companies, registered schemes and their officers to use digital technologies to meet the Corporations Act 2001 and the Corporations Regulations 2001 requirements in respect of meetings, sending meeting related materials and executing company documents'.
1.7
The Minister further explained the need to embed the reform permanently:
These reforms follow the temporary relief initially provided on 5 May 2020 through the Treasurer's instrument making power, and then renewed through the passing of the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 as part of the Morrison Government's response to the coronavirus crisis. As this relief is to expire on 31 March 2022, permanent reforms are necessary so that companies know their obligations and can get on with business. The reforms contain enhancements to the temporary relief measures, and reflect feedback received during consultation. These enhancements ensure that companies are required to meet the same substantive regulatory standards regardless of how a meeting is held. Specifically, it requires companies to give shareholders a reasonable opportunity to participate, including the ability to speak or ask questions orally and in writing. It also provides shareholders that own at least five per cent of voting power to request an independent report or observation of a poll taken at the meeting.
It also provides companies and registered schemes with the flexibility to notify and provide documents in hard or electronic copy, and ensures that members have the opportunity to elect to receive documents in their preferred form.
The reforms allow documents to be signed and executed in flexible and technology-neutral ways to ensure that, regardless of whether company officers execute documents electronically or physically, the execution will be valid. The reforms extend the ability of company agents to make contracts and execute documents—including deeds—flexibly.
Background
1.8
According to the Explanatory Memorandum (EM) the bill would make the present regulatory relief measures permanent on the basis that it allows certain documents to be signed in a flexible and technology neutral manner allowing business communications to be conducted with greater ease and lower costs.
1.9
The Coronavirus Economic Response Package Omnibus Act 2020, inserted section 1362A into the Act, empowering the Treasurer to make disallowable legislative instruments to temporarily modify the provisions of the Corporations Act (and other specified actions).
1.10
On 5 May 2020 the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (Determination No. 1) made temporary modifications to allow the use of electronic means to hold meetings and execute documents. The Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination No. 3) extended the application of these modifications and they self-repealed on 21 March 2021.
1.11
Similarly, on 25 May 2020, the Treasurer made the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020 (Determination No. 2) which made temporary modifications relating to continuous disclosure. The Corporations (Coronavirus Economic Response) Determination (No. 4) 2020 (Determination No. 4) extended the application of these modifications and they self-repealed on 22 March 2021.
1.12
Section 1362A restricted the Treasurer's power to make such legislative instruments to the period 25 March 2020 to 24 September 2020. This section also limited the duration of Determinations Nos. 1 to 4 to a maximum duration of six months. These provisions prevented further extension of the COVID-19 temporary measures.
1.13
The government renewed the relief through Treasury Laws Amendment (2021 Measures No. 1) Act 2021, to give companies certainty of their obligations through the coronavirus crisis.
1.14
The EM notes that the temporary instrument allowed the Treasurer to provide short-term regulatory relief to those who were unable to meet their obligations under the Act due to the coronavirus crisis. This determination supported companies so they could continue to operate while still meeting social distancing requirements brought about by the coronavirus crisis.
1.15
The temporary reforms allowed companies and their officers to:
validly execute documents electronically;
provide meeting-related materials electronically; and
hold wholly virtual meetings.
Senate Standing Committee on Economics
1.16
On 18 February 2021, the Senate referred the provisions of the Treasury Laws Amendment (2021 Measures No.1) Bill 2021 to the Senate Economics Legislation Committee for inquiry. The committee tabled its report into the bill on 12 March 2021. On 25 February 2021, the Senate extended the reporting date to 30 June 2021.
1.17
Despite the Senate extending the reporting date, and despite the committee holding no public hearings and receiving no submissions from any government department or agency, the Legislation Committee reported on the inquiry on 12 March 2021.
1.18
On 16 March 2021, the Senate referred the provisions of the bill to the Senate Economics References Committee for inquiry and report by 30 June 2021 to enable meaningful public consultation. The Senate adjourned debate on the bill until the first sitting day in August 2021.
1.19
On 10 August 2021, the government renewed the temporary measures through the Treasury Laws Amendment (2021 Measures No. 1) Act 2021. This temporary relief will expire on 31 March 2022.
1.20
The EM notes that, as part of the 2020-21 Budget's Digital Business Plan the government stated that it would consult on making the reforms permanent. On 17 February 2021, the government announced that it would progress:
permanent reforms that will facilitate companies and their officers to validly execute documents and send meeting-related materials electronically; and
conduct a 12-month opt-in review of annual general meetings to enable a proper assessment of the benefits of using technology to engage with members.
Provisions of the bill
1.21
The bill contains two schedules:
Schedule 1—Signing and executing documents
Schedule 2—Meetings and sending documents
1.22
Schedule 1 to the bill allows certain documents to be signed in flexible and technology neutral manners. This covers:
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.
1.23
The EM further notes that the amendments are also made to:
…extend the statutory document execution mechanisms to proprietary companies with a sole director and no company secretary.
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.
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.
Documents relating to meetings may be signed and given using electronic means, regardless of whether the meeting is a virtual, physical or hybrid meeting.
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.
1.24
The measures proposed in the bill come into effect on 1 April 2022.
Consultation
1.25
The EM outlines that Treasury consulted through four different avenues. Firstly it obtained 'data and information on the substantive effect of the temporary reforms from stakeholders and analysing confidential and public communications from industry and investor stakeholders. As a part of this process, Treasury analysed 17 submissions and reports from different stakeholders, and spoke with a range of stakeholders'. Secondly, it noted the findings and recommendations of the Senate Select Committee on Financial Technology and Regulatory Technology. Thirdly, it ran its own public consultation on the exposure draft legislation on several occasions and finally, it conducted public consultation on the Improving the Technology Neutrality of Treasury Portfolio Laws as part of the Deregulation Taskforce's modernising business communications agenda.
1.26
As indicated in the Background section above, the Senate Standing Committee on Economics Legislation and References committees both undertook inquiries into the Treasury Laws Amendment (2021 Measures No.1) Bill 2021.
Financial impact
1.27
The EM states that the bill has no financial impact. The EM provides a number of options where it hypothesises a range of possible compliance savings derived thorough the implementation of the bill stating that the savings impact is on average $450 million per year over 10 years—'This is a result of combining the savings associated with electronically sending meeting-related materials ($20 million) and electronic document execution ($430 million)'.
Legislative scrutiny
1.28
The EM notes that the 'bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011'.
Regulatory impact statement
1.29
The EM notes that the permanent reforms in respect of document execution and sending meeting-related materials are the subject of the Regulation Impact Statement included in the EM. These reforms clearly articulate that the law clarifies that physical, hybrid or virtual meetings (if expressly permitted by constitutions) can be held.
1.30
The EM explains that, in February 2021, the government commenced a
12-month review of annual general meetings and that a separate Regulation Impact Statement will be drafted for meetings, covering the rules that are being consulted on as part of the Corporations Amendment (Meetings and Documents) Bill 2021 drawing on the information obtained as part of that review.
Conduct of the inquiry
1.31
In accordance with its usual practice, the committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by 8 November 2021.
Submissions and public hearings
1.32
The committee received a total of 21 submissions which are listed in Appendix 1. The committee also received additional information, including answers to questions taken on notice (as listed in Appendix 1).
Acknowledgements
1.33
The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions.
Notes on references
1.34
In this report, references to the Committee Hansard are to the Proof Hansard and page numbers may vary between Proof and Official Hansard transcripts.