Guidance for your 2023 Annual General Meeting.

Corporate Update

4 Sept

Written By AGH Law

With annual general meeting (AGM) season for public companies using a financial year (FY) ended 30 June 2023 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 Virtual AGMs and electronic notices

Although the broader societal impacts of COVID-19 are far less prominent this AGM season, we remind companies that several of the procedural flexibilities (such as virtual meetings and electronic dispatch of notices) which were temporarily made available during the peak of COVID-19 became permanent in early 2022 via legislative reforms to the Corporations Act 2001 (Cth) (Corporations Act).

Please see section 3 below for further discussion regarding virtual meetings and electronic dispatch of notices. For a refresher on the procedural reforms from 2022 more generally, please refer to section 1 of our article from 23 August 2022 here.

2 Employee incentive schemes

As discussed in our insights dated 17 August 2022 (available here) and 19 January 2023 (available here), Division 1A was introduced into Part 7.12 of the Corporations Act (Division 1A) during October 2022, replacing the previous class order relief provided by ASIC in relation to employee share schemes (ESS).

Importantly, to rely on and benefit from the relief introduced by Division 1A, listed companies that have not already done so should 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.

One consideration for this AGM season is that listed entities must comply with a 5% issue cap when offering awards under an ESS where there is either up front consideration payable or an exercise price payable on exercise/conversion (in relation to convertible securities), unless a higher issue cap is specified in the company’s constitution. Importantly, all awards issued by an entity under an ESS in the prior 3 years, including awards for no monetary consideration and awards issued under a disclosure exemption (e.g. in reliance on the “Senior Manager” or “sophisticated investor” exemptions), are to be included in the issue cap calculation. This differs from the approach under the previous ASIC class order, where issues made in reliance on a disclosure exemption were not included in the cap.

In light of the above, companies may wish to consider amending their constitution to include a higher issue cap that aligns with the cap proposed under ASX Listing Rule 7.2 Exception 13. AGH Law can assist listed companies with updating their ESS documentation and amending their constitution to increase the ESS issue cap, including the preparation of necessary AGM resolutions.

3 Other important considerations

Set out below are some other important considerations for listed companies with respect to its upcoming AGM.

Method for holding AGM

As noted above, as a result of permanent amendments made to the Corporations Act in 2022, companies may hold a hybrid meeting (i.e. in person and online) regardless of any specific term in its constitution. However, a company may only hold a virtual-only meeting if its constitution expressly permits it to do so.

Accordingly, companies considering holding a virtual AGM (whether this year and in the future), should review whether their constitution allows them to do so and, if not, consider a resolution to amend the constitution at this year’s AGM in order to allow for virtual-only meetings in future years.

Determine how the notice of AGM will be sent

The permanent amendments to the Corporations Act from 2022 also allow a company to give a document relating to its AGM (i.e. the notice of AGM and proxy forms) to shareholders electronically. A company may give the notice of meeting electronically by:

giving the document to the person by electronic means; for example, via email; or
using electronic or traditional means to provide shareholders with sufficient details to allow them to view or download the document electronically; for example, by sending an email with a link to download the notice of AGM or, where no email has been provided, via a letter sent by post.

Importantly, companies must keep in mind that shareholders who have made an election to receive hard copy documents by the relevant cut-off date must be sent hard copies of the notice of AGM and other related documents. Generally, to be effective, the shareholders request must have been received by the company more than 30 days prior to the date the notice of AGM is sent to shareholders.

Director elections

Before sending the notice of AGM, the board must determine the directors that must retire and stand for re-election at the AGM. Directors may be required to retire and stand for re-election either due to specific provisions in the company’s constitution or otherwise in accordance with the ASX Listing Rules.

Boards of ASX-listed entities may also wish to pay particular attention to gender and skill diversity when considering the directors it will put forward for election or re-election, with shareholder activism in this area (including shareholder-requisitioned resolutions calling for the appointment of new directors) becoming more prominent in the junior and mid cap space.

Review the share register

We recommend that boards should monitor the share register, preferably well in advance of the AGM, to assist in determining whether any of the company’s shareholders are known for particular views or actions and therefore more likely to engage in shareholder activism.

Voting on a poll and reports on polls

The permanent changes to the Corporations Act in 2022 now require ASX listed companies to conduct votes on all resolutions contained in the notice of AGM on a poll. Additionally, a member or group of members with at least 5% voting power may now require the company to appoint an independent person to observe a poll or scrutinise its outcome and prepare a report.

We therefore encourage companies to ensure that there are proper procedures in place to conduct all votes on a poll at the AGM and appoint an independent person to observe the poll, if requested.

4 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). As discussed in section 3 above, 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.

5 Resolution 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 (or renewal) 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, entities are required to specify the maximum number of equity securities proposed to be issued under the scheme following approval to be disclosed. As set out in section 2 above, companies may also wish to consider an amendment to their constitution to allow for a higher issue cap under the Corporations Act.

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 and/or to increase the issue cap of ESS awards that are issued for monetary consideration.

Appointment of auditor

(Purpose): S 327B of CA.
(Comments): Your auditor must firstly be nominated by a shareholder. Importantly, any entity that has not yet held an AGM since the date of listing should consider whether it needs to include a resolution ratifying the appointment of its auditor.

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.

6 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.

Liability limited by a scheme approved under Professional Standards Legislation.