Hybrid or Virtual Shareholder Meetings – one year on

Introduction

As we approach the first anniversary of the commencement of new provisions in the Corporations Act which allow for shareholder meetings to be held using virtual meeting technology only, or by a combination of physical attendance and virtual meeting technology (hybrid meetings), it is timely to look at how the provisions have been put into practice. An overview of the provisions is provided at the end of this article.

Several ASX listed entities proposed resolutions to amend their constitutions to take advantage of the new provisions. However, not all proposals were well received, with some being withdrawn prior to the meetings at which they were to be considered, in direct response to negative feedback by shareholders.

Much of that feedback is reflected in commentary by four of the leading proxy advisors.

Australian Shareholders’ Association

• The Australian Shareholders’ Association (ASA) is an independent not-for-profit shareholder association principally advocating on behalf of retail shareholders.
• The ASA has been vocal in expressing its concern for virtual-only AGMs indicating that it reduces access for retail shareholders and transparency by company boards and management[1].
• The ASA indicated it supports the holding of hybrid AGMs and (amongst other points) applauded the explicit provisions which confirm that AGM technology must allow members to exercise the pre-existing right to ask questions or make comments verbally and in writing.
• Furthermore, the ASA emphasised in its policy guidelines the importance of holding meetings at a reasonable time and place, for reasonable technology to be used, and the general right to give members a reasonable opportunity to participate.
  

Glass Lewis[2]

• Glass Lewis provides corporate governance services including research and data for institutional investors to make decisions about voting at shareholder meetings.
• Glass Lewis provided commentary in their 2022 policy guidelines which (amongst other points) sets out that they have concerns that ‘virtual-only meetings can be held in such a way as to prevent full shareholder participation.
• Furthermore, Glass Lewis expressed that they support constitutional amendments allowing such meetings only where:
  • the board has provided reasonable assurance that virtual meetings will allow for reasonable shareholder participation;
  • the board has demonstrated that virtual meetings are not intended to replace in person meetings, where in person meetings are practical; and
  • where the board is majority independent and free from other governance concerns, allowing us additional comfort in relying on the recommendation of the board.
• Glass Lewis indicated in its policy guidelines that they typically oppose constitutional amendments where the above conditions are not reasonably satisfied.
  

Institutional Shareholder Services

• Institutional Shareholder Services (ISS) is a provider of corporate governance services including research reports and voting recommendations for shareholder meetings.[3]
• The ISS proxy voting guidelines for Australia recommend voting for proposals that allow the company to convene hybrid shareholder meetings and generally voting against proposals that would enable it to convene virtual only meetings[4].
• Furthermore, the ISS guideline indicates it will generally recommend voting against proposals where the proposed wording in a company’s amended constitution is ambiguous and enables the company to convene virtual-only meetings outside exceptional circumstances.

Australian Council of Superannuation Investors[5]

• The Australian Council of Superannuation Investors (ACSI) provides advocacy on behalf of its members and voting recommendations for shareholder meetings. Its members include 26 Australian and international superannuation funds, assets owners and institutional investors.
• The ACSI welcomed moves to protect shareholder rights at company AGMs but warned of the challenges of virtual only meetings beyond the pandemic. The ACSI stated that “there is a real concern from investors large and small that a move to virtual only meetings in perpetuity could reduce the transparency and engagement of company meetings”.
• Furthermore, the ACSI Governance Guidelines indicate that the ACSI encourages companies to hold shareholder meetings by remote communication only as a supplement to traditional in-person shareholder meetings and not as a substitute.

Recap of the Corporations Act Amendments

On 22 February 2022, the Corporations Amendment (Meeting and Documents) Act 2022 (Cth) (Amending Act) received Royal Assent and amended the Corporations Act 2001 (Cth) (Act).

The Amending Act provides the ability (under certain conditions):

• for certain documents to be signed in physical form or in electronic form (technology neutral signing);
• for certain documents to be sent in physical form or electronic form (technology neutral sending of certain documents); and
• on how meetings of members may be held.

This article focuses on how a meeting of members may be held. The Amending Act substituted s 249R of the Act, and sets out:

A company may hold a meeting of its members:

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

DMAW Lawyers provides further information on the Corporations Amendments in the following link.

Summary

Subject to the provisions of the Corporations Act, companies can hold in person or hybrid meetings. In addition, virtual only meetings can be held if required or permitted within their constitution.

However, prior seeking amendments to a company constitution to adopt the new provisions, companies should carefully consider the views of their shareholders, and information provided by proxy advisors.

DMAW Lawyers would be pleased to assist clients in considering their options. For further information, please contact Peter Kupniewski (pkupniewski@dmawlawyers.com.au) or Mario Pegoli (mpegoli@dmawlawyers.com.au) on (08) 8210 2222.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.

[1] Australian Shareholders Association, Government Allows Virtual-Only AGMs to the detriment of retails shareholders (media release), 20 October 2021, accessed 2 December 2022.

[2] See Glass Lewis (Australia), 2022 Policy Guidelines - Australia, 5 - 6 (accessed 2 December 2022).

[3] Institutional Shareholder Services group of companies, Institutional Shareholder Services Website, About us (accessed 2 December 2022).

[4] Institutional Shareholder Services group of companies, Proxy Voting Guidelines Benchmark Policy Recommendations, Effective for Meetings on or after February 1, 2022, Published December 13, 2021, 6 (accessed 2 December 2022).

[5] See Australian Council of Superannuation Investors (ACSI), Australian Council of Superannuation Investors Website, Who we are (accessed 2 December 2022).