Virtual Meetings and Electronic Execution of Corporate Documents during Covid-19
As COVID-19 continues to affect companies, many questions about business operations and meeting legal obligations have been at the forefront of our client’s minds.
The Morrison Government resolved many of these queries by instituting temporary measures to provide companies with legal certainty by introducing legislation to modify the Corporations Act 2001 (the “Act”), effective for six months from 6 May 2020.
The Corporations (Coronavirus Economic Response) Determination (No 1) 2020 (the “Determination”) modifies the Act and removes any legal uncertainty regarding the validity of virtual (online) meetings by ensuring companies are able to give notice of, convene and conduct annual general meetings and other meetings prescribed under the Act (such as creditors’ meetings) by electronic means while public health restrictions are in place.
The Determination sets out conditions for both issuing a notice and the conduct of meetings
The requirement to provide notice remains, that is, a notice must be given to persons entitled to attend and participate in a meeting. However, additional information in relation to a virtual meeting must be provided. Such as, an explanation as to how the participant can vote and ask questions during the virtual meeting, as well as, how the participant can access the virtual meeting (e.g. via an email with an accessible hyperlink).
If a company or an administrator/liquidator has issued a notice prior to the Determination coming into force and that meeting is now to take place virtually, then that company or administrator/liquidator must issue another notice, at least 7 days prior to the virtual meeting, which includes the additional information about accessing and participating in the virtual meeting.
While hosting a virtual meeting may be conducted in a similar fashion to a physical meeting i.e. that all those participating can ask questions and vote, the voting process of a “show of hands” may not be used during the course of a virtual meeting.
Votes must be taken by a poll and each participant must be provided with the opportunity to vote in real time and, if practical, ahead of time.
Under these changes, company boards will be able to hold annual general meetings online and achieve a quorum with shareholders if the company complies with the abovementioned conditions.
Section 6 of the Determination modifies section 127(1) of the Act to enable the entire process of executing a document to be carried out electronically.
In the circumstances where a document would ordinarily be signed under a common seal, the company may now:
- have each officer of the company sign a copy or counterpart of the document in physical form; or
- use electronic communication which reliably identifies the person and indicates the person’s intention about the contents of the document.
This means that signatories do not need to sign the same physical document.
Alternatively, documents could be signed and scanned by the first signatory and then printed and signed by the second signatory or separate electronic signatures could be applied to fully electronic versions of the document.
The Explanatory Memorandum to the Determination further expands on the variety of means by which officers of a company might sign a document electronically by way of:
• pasting a copy of a signature into a document;
• signing a PDF on a tablet, smartphone or laptop using a stylus or finger;
• cloud-based signature platforms like DocuSign.
These changes allow greater flexibility for clients who are house-bound due to COVID-19 restrictions.
In the event that you need to sign a document or have any further queries regarding electronically signing a document or virtual meetings, please do not hesitate to contract Simon Singer, David Penkin, Ee Kee Ng or Tony Lee for further information.