Guidance for your 2022 Annual General Meeting.

Corporate Update

23 Aug

Written By AGH Law

With annual general meeting (AGM) season for public companies using a financial year (FY) ended 30 June 2022 now upon us, we've set out below some key regulatory updates and reminders to help you draft your notice of meeting (Notice) and prepare for your AGM this year.

1 COVID-19 - Recent procedural reforms

As the effects of COVID-19 continue to linger, it is important for companies to be aware of the procedural flexibilities now available for AGMs, and the practical implications that COVID-19 might have.

In response to COVID-19, permanent reforms affecting shareholder meeting procedures were made to the Corporations Act 2001 (Cth) (Corporations Act) via the Corporations Amendment (Meetings and Documents) Act 2022 (Cth). These changes took effect from the FY 2021 AGM season and will therefore apply to your AGM this year.

Set out below are some of the key developments (and reminders) arising from these procedural reforms.

(Holding meetings virtually): Companies can hold their shareholder meetings (such as AGMs) either:
- at a physical venue only;
- provided the company’s constitution expressly permits, by wholly virtual means; or
- via a combination of a physical venue and virtual means (i.e. a hybrid meeting), regardless of whether the company’s constitution expressly permits for the holding of hybrid meetings.
Accordingly, consider whether your constitution requires updating to expressly permit for holding shareholder meetings via wholly virtual means.
(Facilitating shareholder participation virtually): Companies must ensure that their shareholders have a reasonable opportunity to participate in the meeting irrespective of how it is conducted. Where meetings are held wholly, or partially, via virtual means, the technology must be reasonable and permit shareholders to exercise their right to ask questions and make comments, both orally (i.e. in real time) and in writing.
(Shareholders attending meetings virtually): Shareholders who attend meetings, whether physically or by virtual means, are taken for all purposes to be present in person at the meeting for the purposes of determining a quorum.
(Notifying shareholders of document access): Companies must notify shareholders of their right to elect and receive a document electronically or in physical form at least once every financial year, or a notice to that effect must be readily available on the company’s website. We generally recommend that this notification is simply included in your Notice of AGM each year.
(Sending meeting documents electronically): Shareholders may elect to receive meeting documents in hard copy, electronically, or not at all. Where an election is made and the sender does not take reasonable steps to abide by the election, the sender will have committed an offence of strict liability. Shareholders can also make ad hoc requests for documents to be provided a particular way, notwithstanding any previous election. Just note, in order to send meeting documents electronically, the company must have collected the shareholder’s email address.
(Shareholders signing forms electronically): Shareholders can sign documents relating to a meeting, such as proxy forms, by signing an electronic form of the document and using an electronic means if the method identifies the shareholder, indicates the shareholder’s intention with respect of the information recorded in the document and is reliable as appropriate for the purposes for which the information was recorded.
(Shareholders requesting vote scrutineers): Shareholders (or a group of shareholders) of a listed company holding at least 5% of the votes may request the company to appoint an independent person to observe the conduct of a poll, or to scrutinise the outcome of a poll, and prepare a report.

2 Employee Incentive Schemes - Incoming legislative changes

As discussed in our insight dated 17 August 2022 (available here), the Treasury Laws Amendment (Cost of Living Support and Other Measures) Act 2022 introduced a new Division 1A into Part 7.12 of the Corporations Act (Division 1A), commencing on 1 October 2022. Division 1A replaces and expands the current relief in relation to employee share schemes (ESS) for listed bodies afforded by ASIC Class Order [CO 14/1000] (Class Order).

A brief summary of the proposed impacts of Division 1A on listed companies is set out below.

(Contractor / service provider eligibility): The ability to issue ESS interests to contractors and other service providers has been broadened.
(Quotation requirement): There is no longer any requirement for a listed company’s shares to have been quoted for 3 months, making it easier to issue ESS interests for newly listed companies. Similarly, listed entities that have been suspended from quotation for more than 5 days in the preceding 12 months will be able to rely on the new relief.
(Cleansing requirement): Cleansing notices (or cleansing prospectuses) will now be required each time any convertible securities issued pursuant to an ESS are exercised.
(5% share limit): The 5% issue limit will only apply to offers for monetary consideration, and companies may now specify their own issue limits in their constitutions, subject to obtaining shareholder approval.
(Monetary consideration limit): The monetary cap per participant per year has been increased to a base limit of $30,000.
(Non-monetary vs monetary consideration documentation): Offers made for no monetary consideration do not have any specific requirements, other than the need for a statement that the offer is made pursuant to Division 1A. In the case of offers made for monetary consideration, an offer document is required (with specific disclosure requirements) and participants cannot acquire their ESS interests until 14 days after receiving the necessary disclosure from the company.

Importantly, to rely on and benefit from the relief introduced by Division 1A, listed companies will need to review their existing ESS documentation (including ESS offer documents) to determine whether any updates are necessary. In addition, companies may need to consider updates to other documents (such as their securities trading policy) to account for the replacement of the Class Order.

AGH Law can assist listed companies with updating their existing ESS documentation in order to comply with Division 1A, including the preparation of necessary or prudent AGM resolutions.

3 Key events for your AGM

ASX listed companies should have regard to the following steps and timelines when planning their AGM.

AGM date announced to ASX

(Timing): At least 5 business days before director nominations close.
(Comments): Nominations must be accepted by companies up to 35 business days before the AGM.

Drafting the Notice

(Timing): Up to 1 week.
(Comments): The complexity of the resolutions sought in your Notice will guide the drafting time, so we encourage you to turn your mind to the proposed resolutions now and contact us to discuss them.

Lodgement with ASX for review

(Timing): Up to 5 business days for ASX (or as extended).
(Comments): Notices that contain resolutions for ASX purposes must be submitted to ASX for review before dispatching to shareholders. ASX may extend the review period (typically 5 business days) if the Notice contains many resolutions or complex transactions.
Note that ASX waiver applications may be required in connection with certain resolutions considered at the AGM. Provided the waiver application contains all necessary information for ASX to consider, ASX has up to 10 business days to review a standard waiver or 20 business days for non-standard waivers. If you consider that a waiver application may be necessary with respect to your Notice, it is important to take these review periods into consideration when preparing your Notice and planning your AGM.

Lodgement with ASIC for review (if applicable)

(Timing): Up to 14 days for ASIC (or as shortened).
(Comments): Notices that seek approval for related party transactions under the Corporations Act must also be lodged with ASIC via the recently established ASIC regulatory portal, along with payment of $802. An additional fee of $130 applies if you are seeking to shorten the 14 day review period.
The Corporations Act requires final and signed Notices to be lodged with ASIC for review, not draft Notices. As such, Notices should only be lodged with ASIC following ASX review.

Printing and posting

(Timing): 1-2 business days.
(Comments): The relief for distributing Notices electronically described above may reduce the timing of this step.

Notice period

(Timing): At least 28 clear days before the AGM.
(Comments): You must give your shareholders at least 28 clear days’ notice of the AGM. Your company's constitution will determine when the Notice is deemed to have been received by shareholders (if sent by post or email), at which point the 28 clear day notice period will commence.
Please note that a 'clear day' includes weekends and public holidays.

Eligibility to vote

(Timing): Register no more than 48 hours before the AGM.
(Comments): You are required to determine the persons who hold shares in the company at a specified time before the AGM, for the purpose of being entitled to attend and vote. The specified time cannot be more than 48 hours before the meeting and should be specified in the Notice.

Receipt of proxy forms

(Timing): No less than 48 hours before the AGM.
(Comments): For a proxy appointment to be effective, the proxy’s appointment must be received by the company at least 48 hours before the AGM, unless provided otherwise by the company’s constitution. This can be done by email.

Chair and CEO speeches

(Timing): Before the AGM.
(Comments): You must provide any Chair’s speech and any CEO’s speech to ASX before the AGM.

Meeting and voting

(Timing): AGM.
(Comments): Certain formalities and procedures need to be observed and complied with at the actual AGM (please contact us if you'd like to discuss these further). All ASX resolutions must now be conducted by poll rather than a show of hands.

Results announced to ASX

(Timing): Immediately after the AGM.
(Comments): The voting results must be announced to ASX immediately after the AGM. An editable pro forma document that companies can use to announce meeting is available from ASX's website.

4 Resolutions to consider at your AGM

Set out below are some of the resolutions commonly or necessarily considered by ASX listed companies at AGMs.

Adoption of remuneration report

(Purpose): S 250R(2) of Corporations Act (CA).
(Comments): This resolution is non-binding, however voting against may trigger a 2 strike spill resolution (see below).

Re-election of directors

(Purpose): Constitution, ASX Listing Rule (LR) 14.4.
(Comments): You need to consider which directors are required to be re-elected by rotation. As a general rule, a director must not hold office without re-election past the 3rd AGM following his or her appointment or 3 years (whichever is longer).

Election of directors

(Purpose): Constitution, LR 14.4.
(Comments): Any directors appointed as casual vacancies since the last AGM must retire and seek re-election by shareholders at this AGM.

Additional 10% placement capacity

(Purpose): LR 7.1A.
(Comments): Allows companies with a market capitalisation of less than $300 million to seek approval from their shareholders to issue an additional 10% of their issued capital over a 1 year period. Approval must be sought at the AGM to enable issues to be made during the following year.

Prior issue of securities

(Purpose): LR 7.4.
(Comments): You should seek shareholder approval to ratify any securities issued in the previous year under the company’s placement capacities under ASX Listing Rules 7.1 and 7.1A (if applicable). Approval will refresh the placement capacities, providing renewed opportunity for the company to raise capital in the future.

Proposed issue of securities

(Purpose): LR 7.1.
(Comments): If you have any planned or upcoming capital raisings in the 3 months following your AGM, you should seek shareholder approval at the AGM to avoid using up the company’s placement capacities under ASX Listing Rules 7.1 and 7.1A (if applicable).

Adoption of employee incentive scheme

(Purpose): LR 7.2 (exception 13(b)).
(Comments): If you do not obtain approval for the company’s employee incentive schemes every 3 years, securities issued under that employee incentive scheme will be counted towards your 15% placement capacity under ASX Listing Rule 7.1. Importantly, amendments in December 2019 also require that the maximum number of equity securities proposed to be issued under the scheme following approval to be disclosed. Further, as set out in section 2 above, consider whether your employee incentive scheme documentation requires updating to meet the updated requirements in Division 1A.

Issue of securities to directors

(Purpose): LR 10.11, LR 10.14, S 208 of CA.
(Comments): Unless an exception applies, you will need to seek approval under the ASX Listing Rules to issue securities to directors. You may also need to seek approval under exceptions in the Corporations Act (e.g. the reasonable remuneration exception in section 211).

Increase to director fee pool

(Purpose): Constitution, LR 10.17.
(Comments): You cannot increase the maximum fees payable to non-executive directors without shareholder approval.

Adoption of constitution

(Purpose): S 136(2) of CA.
(Comments): Consider whether your current constitution requires updating to expressly allow for virtual meetings.

Appointment of auditor

(Purpose): S 327B of CA.
(Comments): Your auditor must firstly be nominated by a shareholder.

2 strike spill resolution

(Purpose): S 250V(1) of CA.
(Comments): A 2 strikes resolution will be necessary if more than 25% of the eligible votes cast were against the remuneration report at last year’s AGM.

5 Next Steps

If you require a Notice for your upcoming AGM, or have any queries about your upcoming AGM, get in touch with our team.

Important

The contents of this publication should not be relied upon as legal advice, but instead as commentary and general information. Specific legal advice about your circumstances should always be sought separately before taking any action based on this publication.

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