In an attempt to facilitate the continuation of business during the COVID-19 pandemic, the Treasurer made a determination on the 5th of May 2020 which provides temporary modifications on how meetings are held and companies can execute documents. These modifications are made pursuant to the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (the Determination) which applies until the 6th of November 2020.
Virtual meetings
The Determination applies to provisions contained in the Corporations Act, the regulations, the Insolvency Practice rules and the Passport Rules, which:
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require or permit a meeting to be held or regulate the giving of notice of a meeting or the conduct of a meeting; or
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give effect to, or provide a means of enforcing, a provision in the constitution of a company or registered scheme, that requires or permits a meeting to be held, or regulates giving of notice of a meeting or the conduct of a meeting.
Accordingly, the Determination will affect a variety of meetings including, without limitation, director’s meetings, meetings of members and meetings of creditors.
The Determination permits meetings to be held virtually without the need for the persons entitled to attend to be physically present at such meeting and provides that notices of meetings can be given using technology provided the notice includes sufficient detail on how persons entitled to attend can participate in the meeting. In terms of notices of meeting issued prior to the commencement of the Declaration, the person required or permitted to give such notice must, at least 7 days before the meeting is held virtually, give a fresh notice of the meeting with sufficient details.
The following requirements will need to be met in respect of virtual meetings pursuant to the Determination:
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persons participating in the meeting are taken for all purposes to be present at the meeting (for example, in order to determine if a quorum is present);
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a vote taken at such meeting must be taken on a poll and not by a show of hands – this must be done using one or more technologies which entitles each person to vote and to participate in the vote in real time and by recording their vote in advance of the meeting; and
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persons must be given the opportunity to speak (for example, to ask questions).
The modifications provided in the Declaration will be welcomed by public companies which are now able to hold annual general meetings virtually without the need of a physical venue with each shareholder being in attendance. Similarly, given the current economic climate, voluntary administrators who are appointed will be able to take advantage of the modifications when giving notice of, and convening, meetings of creditors.
Execution of documents
The Determination modifies the operation of section 127(1) of the Corporations Act which permits a company to execute documents by two directors or a director and company secretary. Pursuant to the Determination, a company is now permitted to execute a document electronically and on separate electronic copies of such document. In signing documents electronically pursuant to the Determination, sections 9(1)(a) and 9(1)(b) of the Electronic Transactions Act have been adopted meaning that the method used for electronic signing must identify the person executing and indicate their intention to be bound and that such method is appropriate for the purpose for which the company is executing the document.
The Determination has also temporarily removed the uncertainty around split-execution of documents signed in ‘wet-ink’ as it expressly permits the company officers to sign different counterparts of the same document under section 127(1) of the Corporations Act. The Determination does, however, require that the counterpart that is signed contains the entire agreement rather than just the extracted signature page(s).
Although the Determination has not specifically made mention of a modification to the paper, parchment or vellum rule for deeds, it could be inferred that deeds are meant to be captured in the modifications. To err on the side of caution, we recommend that the modifications be used only as a last resort for the execution of a deed.
Lastly, the Declaration also modifies section 129(5) of the Corporations Act to allow a person to assume that a document (including an electronic document) has been duly executed by a company where such document has been signed under section 127(1) of the Corporations Act.
If you would like to discuss the contents of this article please contact Partner Zina Edwards, Senior Associate Lauren Cloete or Lawyer Calyb Soekoe.
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