As you may be aware, in response to the COVID-19 pandemic Parliament introduced the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination) to facilitate virtual meetings and the electronic signing of documents under section 127 of the Corporations Act (2001) (Cth) (Corporations Act).
On 21 March 2021, the temporary rules that were put in place by the Determination expired.
It was expected that the current temporary rules would be extended, however the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill) which proposed to do so did not pass on the last Parliament sitting day prior to 21 March 2021. The Senate has adjourned debate on the Bill until 3 August 2021.
Therefore, section 127 of the Corporations Act is to be read without the benefit of these temporary rules. Practically, this means that electronic signing (for example, through DocuSign) should not be used for agreements and deeds signed under section 127 until the Bill is passed.
Further, until the adoption of any new legislation:
- notices of meeting for public companies must be posted or electronically despatched to shareholders (according to shareholders’ stated preferences) as was done prior to the adoption of the Determination; and
- general meetings must be held at a physical location and cannot be held entirely online or ‘virtually’ (although providing a virtual participation option for a physical meeting remains possible).
The ASIC has in a media release on 23 March 2021 indicated that it will shortly adopt a temporary ‘no action’ position in relation to the convening and holding of virtual meetings.
We will provide an update on electronic signing and virtual meetings as the situation develops.
We previously advised in an article in our ECM Bulletin in October 2020 (‘Update on Continuous Disclosure – COVID-19 temporary changes – How do they change a director’s liability?‘) that the Bill had also proposed to extend the temporary changes to the Corporations Act’s continuous disclosure provisions, which changes were made under the Corporations (Coronavirus Economic Response) Determination (No.4) 2020. These temporary changes modified the test of whether there had been a breach of the continuous disclosure provisions in the Corporations Act from an objective to a subjective test.
These temporary changes have now expired and the objective test for continuous disclosure has returned. This means that an ASX listed entity will be in breach of the continuous disclosure provisions of the Corporations Act if it does not disclose information which is not generally available (and which does not come within one of the exceptions to disclosure) and is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of the entity’s securities.
The Bill would have changed the test so an entity would only then be in breach of the continuous disclosure provisions if it knew or was reckless or negligent with respect to whether that information would, if it were generally available, have a material effect on the price or value of the entity’s securities.
If you have any queries in relation to the above please do not hesitate to reach out.
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This document is for general information only and cannot be relied upon as legal advice.