Background

The pandemic has played havoc with charitable and non-profit companies ability to hold general meetings, director’s meetings and executing documents in person during lockdowns and mandates.

In 2020, the Federal Treasurer used his temporary instrument-making power under the Corporations Act 2001 (the Act) to issue a determination that temporarily allowed companies to use technology to satisfy their legal obligations concerning meetings and document execution.

The temporary reforms allowed companies and their officers to:

  1. validly execute documents electronically;
  2. provide meeting-related materials electronically; and
  3. hold wholly virtual meetings.

The Federal Treasurer subsequently remade the determination to extend the relief until 21 March 2021, and in August 2021, the Government renewed the temporary measures through the Treasury Laws Amendment (2021 Measures No. 1) Act 2021. This temporary relief will expire on 31 March 2022.

The Government decided on permanent reforms and introduced the Corporations Amendment (Meetings and Documents) Bill 2021 into Parliament that passed both houses on 10 February 2022 and received assent on 22 February 2022.

The Act amends the Act to:

  1. establish a permanent mechanism to allow companies to hold hybrid (in person and remote) meetings; and
  2. use technology to execute, sign and share company and meeting related documents.

The measures apply to documents sent and meetings held on or after 1 April 2022.

Documents

The measure applies to documents executed on or after the day after Royal Assent being the 22 February 2022.

The measure takes a technology neutral approach and does not mandate the use of any particular type of technology and is also sufficiently flexible to allow for the use of other technologies that may be developed in the future.

Nothing in the measure prevents a document from being signed in the traditional manner or using traditional practices.

Meetings

The measure clarifies (s111L) that companies registered as bodies corporate under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) may hold physical or hybrid meetings (or wholly virtual meetings, if permitted to do so under their constitutions).

Regardless of the format in which the meeting is held, the measure makes clear that ‘members as a whole’ must be given a ‘reasonable opportunity to participate’.

Documents relating to meetings may be signed and given using electronic means, regardless of whether the meeting is a virtual, physical or hybrid meeting.

And while these amendments to the Corporations Act provide a minimum standard, charities’ and non-profit companies’ governing documents may require more to be attended to or done. They must continue to comply with their governing documents, and they should consider reviewing their governing documents to ensure compliance.

The measures were amended during their consideration by Parliament and a review of the measures operations must be given to Parliament within 30 months. The amendments also ensure that the panel undertaking the review is independent and has the necessary experience to take into account the interests of companies, their members, and other stakeholders.

Mind the Gap!

Given that companies will be required to hold meetings and execute documents pursuant to their current constitutions, many will need to amend their constitutions before they can take advantage of the new measures.

To provide relief to allow companies to do this after 31 March, 2022, the ASIC has issued ASIC Corporations (Virtual-only Meetings) Instrument 2022/129, which allows additional time for holding virtual-only meetings. This will be extended to 30 June 2022 for unlisted public companies such as companies limited by guarantee.

Before a company relies on the relief, the directors of the company must pass a resolution that it would be unreasonable for the company or registered scheme to hold a meeting of its members wholly or partially at one or more physical venues due to the impact of the COVID-19 pandemic.

Takeaway

If your charitable or non-profit company is required to hold a general meeting and has been relying on the previous dispensations in relation to in-person meetings, it needs to seek advice about how to go forward to amend its constitution to allow it to take advantage of the new measures. Not doing so may risk the invalidity of the meetings and their decisions.

Article by: