Leading Perth corporate lawyer Dave Filov has some simple advice for any ASX-listed company looking at making its AGM virtual: “plan, plan and then plan again.”
“You need to get in touch with your share registry early to see what technology is available for you to access and use – and there will be a cost associated,” Filov, a partner at HWL Ebsworth Lawyers, told Cannings Purple Investor Relations Director Peter Klinger.
“[For smaller] entities, you need to be mindful that although your traditional shareholder turnout may not match that of larger companies, in a virtual setting you may attract a lot more shareholders than expected.
“So you do need to strike a balance, have a good look at your register, think about what engagement you’ve had with shareholders during the year, find the right technology, have the right contingencies and planning in place and test it all before you have your meeting.
“You need good scripts and a chairperson who has been well briefed and prepared to handle what situations might pop up.”
Virtual AGMs and shareholder meetings have become not just a nice-to-have but effectively a mandated occurrence as a result of restrictions on public gatherings because of the COVID-19 pandemic.
AGMs are a fixture in the corporate calendar – the once-a-year opportunity for shareholders to directly question the board and leadership of their company and vote on resolutions ranging from the adoption of financial and remuneration reports to director elections and executive financial rewards.
The potential for “electronic” meetings first emerged in March when Australia’s corporate regulator ASIC also announced it would take no action against companies with a December 31 financial year-end if they failed to hold their AGM by the May 31 deadline.
But as the pandemic unfolded – and with strong chance of the traditional AGM season from September to November also being COVID-affected – the pendulum has swung even further towards virtual solutions.
Temporary changes to the Corporations Act have opened six-month window for companies to hold electronic AGMs, with company officers now also allowed to sign documents electronically.
More recently, ASIC released guidance on its expectations for shareholders to be able to participate and vote during virtual meetings.
“Where we ended up in May [with ASIC’s guideline announcement] was a slightly stricter position around the temporary legislative changes [which in turn] clarify the position around someone being present [at a virtual meeting],” Filov explained.
“But in order to get the benefit of that [companies] have to allow holders to participate and vote in real time.
“The guidance makes reference to shareholders being able to observe and listen to debates and then perhaps change their mind. They might have wanted to vote ‘yes’ on something and now want to vote ‘no’ or vice versa.
“It’s as if you were actually at the meeting in a physical sense and able to put your hand up.”
One of the biggest question marks around virtual AGMs has been whether technology can adequately support the seamless running of meetings – and, if it can’t, where the liability lies.
Filov, who previously spent four years as a principal adviser in the Listing Compliance Unit of the ASX, expects ASIC to take something of a conciliatory approach while also reminding companies of its responsibilities.
“Technology, as we know, isn’t perfect. The guidance makes reference to making sure you’ve planned and tested it, tested for volume of participation and then have contingency plans in place or an ability to get messages out if you do have a tech failure,” Filov said.
“Ultimately, where liability lies is something that’s going to be part of agreements and arrangements with a company, perhaps the share registry and also the service provider.
“In a worst-case scenario, you might have to adjourn the AGM for a period of time to get issues sorted. That may then lead companies to fail to meeting statutory deadlines and having to go to ASIC to ask if they can get an extension and make sure there are no ramifications from that.
“There are always teething issues with new approaches such as virtual AGMs. But we have got a great opportunity for laws pertaining to AGMs and shareholder meetings to change for good, and for the better, to allow for this technology to be used all the time, not just during a pandemic.”
While the usual tea, coffee and biscuits might be missing come AGM season, shareholder activism and unrest won’t necessarily go away.
Filov says this just highlights the need for companies to not only get the technology right but ensure they make every effort to engage in advance with shareholders.
“One of the things companies are doing is [saying to shareholders] ‘give us your questions early’,” Filov explained.
“They might group them together and say to shareholders ‘we’ve had lots of questions about this topic, so here’s our response.’ Or it might be ‘we’ve had questions around this topic but we don’t feel like we need to respond’ or ‘this is why we’re not responding.’
“You just need to be transparent about what’s going on.
“As for running a contested AGM or shareholder meeting, you’d want to have access to the better technology. That’s going to come at a cost but I think that cost is just a function of the pandemic and worth the investment, if you think about the alternative of having a technical breakdown.
“There was never the need before for that technology but we’re in a different situation now and we need to be able to give people, while they are sitting and engaged and looking at their screens during these meetings, the ability to vote ‘yes’ or ‘no’ on a poll or ask a question, whether that might be through a chat service or something else.
“Provided you also do those things in a contested context, I think it can be managed. But you need to check it all and plan very well for that.”
Communications with shareholders are at the core of the adjustments required by companies as they prepare for a virtual AGM. Cannings Purple’s Investor Relations team has vast experience in creating and tailoring communications strategies to ensure your message reaches all your shareholders – and not just in the lead-up to the AGM. For more information, contact Peter Klinger.
