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Mar 24, 2020

AIRA calls for virtual AGM change to be made permanent

Regulators worldwide take action to support functioning of AGM season amid Covid-19 restrictions

The Australasian Investor Relations Association (AIRA) has welcomed the decision by the Australian financial regulator to allow virtual AGMs for a limited time and called for the change to be made permanent.

On Friday, the Australian Securities & Investments Commission (ASIC) released a no-action position giving companies the green light to conduct virtual AGMs, as well as delay the date of their annual meeting for two months. 

The no-action position on virtual AGMs will apply to companies that need to hold their meetings by May 31 or during the two-month extension period, although the situation will remain under review. 

‘AIRA welcomes ASIC no-action letter released this morning allowing listed entities to hold hybrid or virtual AGMs over the next few months,’ writes Ian Matheson, CEO of AIRA, in a LinkedIn post. ‘Legislation urgently needed though to make this permanent.’

The ASIC announcement is the latest action by regulators worldwide aimed at helping companies comply with AGM requirements amid the Covid-19 outbreak.

In Australia, non-essential gatherings of more than 100 people indoors are banned and the government has encouraged citizens to undertake social distancing measures, deterring companies from holding traditional, in-person shareholder meetings.

ASIC says it believes that hybrid meetings – where there are physical and virtual components – are already allowed under Australia’s Corporations Act. But the regulator acknowledges there is ‘some doubt’ over whether virtual AGMs are permitted.

The ASIC statement therefore reassures companies that they will not face any non-compliance action for holding such a meeting. Companies still need to consider whether hybrid or virtual meetings are allowed under their constitution, the body adds. 

The Australian regulator also notes the pledge to allow virtual AGMs is ‘conditional on the technology providing members as a whole a reasonable opportunity to participate.’ This technology should include functionality that allows members to vote by poll and ask questions of management, says the regulator.

‘Entities should make an assessment of their AGM-facilitating technologies in advance of holding of the meeting and consider whether it adequately addresses these conditions,’ says the ASIC announcement. ‘If there are concerns, entities can instead postpone the AGM and hold it later in reliance on ASIC’s no-action position on deferred AGMs.’

Global action

Around the world, countries are taking a range of approaches to help listed companies deal with the 2020 AGM season. Switzerland, for example, has allowed companies to hold ‘closed-door’ AGMs with no shareholders present. 

In the US, where the ability to hold a virtual AGM is governed at state level, the SEC has released guidance for companies on holding a virtual-only event.

The US regulator says companies planning a virtual AGM should notify the market of their plans ‘in a timely manner’ and ‘disclose clear directions as to the logistical details of the virtual or hybrid meeting.’

Speaking to IR Magazine last week, Broadridge, which helps administer thousands of AGMs in the US every year, said it expects a ‘significant surge’ of virtual AGMs in 2020. 

‘What we are seeing in the upcoming annual shareholder meetings season is that many more companies and their legal advisers are inquiring about what they can do if they need to make a switch to virtual meetings,’ said Cathy Conlon, Broadridge’s vice president of issuer strategy.

In the UK, the London Stock Exchange and other financial institutions are pushing the government to relax the rules around virtual AGMs, according to Sky News.