No action will be taken if AGMs are postponed until the end of July because of the coronavirus Covid-19 threat.
So says the Australian Securities and Investments Commission (ASIC), adding the virus pandemic may temporarily impact on companies’ ability to hold an annual general meeting (AGM).
“This issue is most immediately relevant for listed and unlisted public companies with 31 December balance dates that are required to hold an AGM by 31 May 2020.”
For these entities, ASIC confirms it will take no action if the AGMs are postponed for two months; that is, until the end of July.
It also supports the holding of AGMs using appropriate technology.
ASIC cautions entities against holding an AGM while there are restrictions on large gatherings, unless the entity can provide members as a whole with a reasonable opportunity to participate in the meeting.
This ‘no-action’ position means that ASIC will not take action against an entity with a financial year end of 31 December 2019 who fails to comply with s250N(2) of the Corporations Act 2001 provided the entity holds the AGM by 31 July 2020 or such later date as ASIC advises (‘extension period’).
Commissioner John Price says a degree of flexible pragmatism is needed to deal with the issue. ASIC will focus on helping entities with the difficulties created by this situation.
“Our position is under continuous review. We are liaising closely with advisors and industry bodies so that we can understand our stakeholders’ needs and respond pro-actively,” Price says.
John Price
ASIC is closely monitoring developments that may affect financial reporting, talking to market participants and auditors, and considering possible impacts and responses.
“At present, there appear to be no widespread indications of any significant issues for entities in meeting their full-year and half-year financial reporting obligations at 31 December 2019,” it adds.
Holding ‘hybrid’ AGMs by May 31 using a physical location and online facilities, or a ‘virtual’ AGM held solely online are allowed.
ASIC considers that hybrid AGMs are permitted under the Corporations Act but entities need to check whether their constitution restricts meetings being held in this way.
ASIC says it does not have the power to modify the Corporations Act to facilitate hybrid AGMs where they are not permitted under an entity’s constitution.
There is some doubt as to whether the Corporations Act permits virtual AGMs and there may also be doubt as to the validity of resolutions passed at a virtual AGM, again ASIC not having the power to alter the Act.
“However, we have provided a no-action position on virtual AGMs. Entities should also consider whether they can hold a virtual meeting under their constitution.
“Entities that are concerned about the validity of virtual meetings may wish to seek legal advice on section 1322 of the Corporations Act. Various irregularities associated with meetings held for the purposes of the Act are not invalidated unless the court makes a contrary declaration. A person may be also able to apply to the court for an order addressing other irregularities.”
ASIC has implemented measures to maintain operations and support and protect staff during this time. This includes implementing stringent hygiene and cleaning protocols, social distancing and flexible working arrangements.
It is working closely with the Australian Government and other regulators as well.
ASIC expects the insurance industry to communicate clearly and accurately to customers about their cover recognising the changing situation they may be facing.
It also has information to help small business operators and notes the Australian Banking Association has announced that Australian banks will defer loan repayments for small businesses affected by Covid-19 for six months.
ASIC also warns people to be wary of Covid-19 scams.
