Update - Not-for-profit companies can hold virtual meetings

As foreshadowed in our article ‘Can not-for-profit companies hold virtual meetings?[NFPi] ’, the Federal Government has put in place reforms to continue to allow companies registered under the Corporations Act 2001 (Cth) (“Companies”) to hold wholly virtual general meetings of members on a permanent basis, but only if this is required or permitted by the Company’s constitution expressly.

The temporary position for holding virtual meetings of directors ceased on 31 March 2022 and the pre-COVID-19 position has been reinstated in relation to directors’ meetings held on or after 1 April 2022.

This update article focusses on the application of the permanent changes to not-for profit Companies, other than ACNC-registered charities. For updated information about the application of the permanent changes to Companies that are ACNC-registered charities, please see out article ‘Update - can charitable companies can hold virtual meetings?[NFPii] ’

Temporary measures put in place for the COVID-19 pandemic under the Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Cth) (“temporary measures legislation”) were due to expire on 31 March 2022 but the Federal Government had proposed that permanent reforms would be passed before the sunset date.

What are the updated changes?

Our article ‘Can not-for-profit companies hold virtual meetings?[NFPi] ’ describes the position for not-for-profit Companies under the Corporations Act before the temporary measures legislation commenced and under the temporary measures legislation.

The Corporations Amendment (Meetings and Documents) Act 2021 (Cth) (“Amending Act”) has received Royal Assent. The Amending Act amends the Corporations Act to allow (among other things) Companies to hold general meetings, provide notices relating to general meetings and keep minutes of general meetings, using electronic means or other technologies on a permanent basis. The changes commenced on 1 April 2022.

The Amending Act makes some changes to the temporary measures legislation and repeals the sunsetting provision so the temporary measures, as amended, now apply on a permanent basis.

The legislative structure adopted in the temporary measures legislation has not been followed in the Amending Act. The concept of “Chapter 2G meetings”, which referred to meetings of a Company’s members and meetings of a Company’s directors (including meetings of a committee of directors), that was introduced in new Part 2G.5 under the temporary measures legislation, has been discontinued. The previous provisions relating to holding virtual meetings of directors have been reinstated within Part 2G.1 and the permanent provisions relating to virtual members’ meetings have been included within Part 2G.2.

Part 2G.5 now only contains the provisions relating to the electronic recording and keeping of minute books required to be kept under the Corporations Act that were introduced under the temporary measures legislation. Those provisions have not changed and are permanent from 1 April 2022. They apply to all Companies, to the extent they are required to keep minutes.

The provisions relating to sending notices and other documents about meetings electronically have been moved from Part 2G.5 to a new Division 2 in Chapter 1 to allow room for future developments. This new Division also now contains the provisions for sending annual financial reports to members for Companies other than Companies limited by guarantee (“CLGs”) and ACNC-registered charities.

General meetings - the new permanent position for not-for-profit Companies

·         Holding general meetings

• Companies still have the option to hold a members’ meeting at one or more physical venues or at one or more physical venues using virtual technology (a “hybrid meeting”) regardless of the requirements in the Company’s constitution but wholly virtual meetings can only be held if this is required or permitted by the Company’s constitution expressly (section 249R).
• There is a new obligation requiring a Company that holds a meeting of members to give the members entitled to attend a meeting, as a whole, a reasonable opportunity to participate in the meeting. Before the temporary measures legislation, the equivalent section only related to the use of technology at meetings. Now, it covers all aspects of holding the meeting and, without limiting what else might be reasonably required, there is new detail as to the reasonableness of the choices of venue and time of the meeting, as well as technology, depending on whether the meeting is wholly physical, at one or more venues, or uses virtual technology. Virtual meeting technology must allow members attending the meeting, as a whole, to exercise orally and in writing any rights of those members to ask questions and make comments (section 249S).
• If members who are entitled to attend a members’ meeting do not have, as a whole, a reasonable opportunity to participate in the meeting or a proceeding at the meeting, the meeting or proceeding will only be invalid if so declared by a Court on the grounds that a substantial injustice has been or may be caused which cannot be remedied by any order of the Court (section 1322(3A)).
• Voting on a show of hands unless a poll is demanded has been reinstated as the default voting method at members’ meetings in whatever form the meeting is held (section 250J).

·         Sending notices of general meetings and other documents

• The new provisions relating to sending of documents apply to any document that is required or permitted under the Corporations Act to be sent by a Company. They cover notices sent by a Company relating to meetings and resolutions of members (and classes of members), annual financial reports (other than reports by CLGs) and certain other notices, reports and documents. They apply not only to notices sent to members but to other persons, such as directors and auditors. While the language of these provisions has changed, the terms are essentially the same as the temporary measures, viz, the Company can send these documents in physical form or electronic form or make them accessible electronically provided that, at the time the document is sent in electronic form or made accessible electronically, it is reasonable to expect that the document would be readily accessible so as to be useable for subsequent reference (sections249J, 110C to 110D. A Company’s constitution may provide for other ways that a document can be sent. The effect of these provisions is to give Companies options for sending the specified types of documents to members and others electronically even if its constitution does not provide for notices to be sent by that means.
• Under section 110E, a member may elect to be sent documents in either physical form or electronic form, either in relation to all documents which can be sent electronically or specified classes of those documents, by notifying the Company (whether or not in writing).
• There is a new requirement for public Companies to either:
• send members, at least once each financial year, a notice about their election rights under section 110E; or
• make such a notice readily available on a website (section 110K).

        This requirement applies to CLGs.

• A Company that does not take reasonable steps to send a document in a manner that complies with a member’s election may commit an offence of strict liability. However, the failure does not affect the validity of the notice or any act, transaction, agreement, resolution or other thing. A Company must also take reasonable steps (within prescribed parameters) to comply with a member’s ad hoc request to be sent a particular document in a particular form and non-compliance may be an offence of strict liability (sections 110F to 110J).
• These new provisions pre-suppose that a member has provided both a physical address and an electronic address for communications. There is no requirement in the Corporations Act for a member to provide both types of address. It will be easier for a Company with a website to comply, but the new requirement could be an added burden for those that don’t.
• Transitional provisions preserve in force member pre-existing elections about how documents are be sent.

Director's meetings - the new permanent position for not-for-profit Companies

The position as to how notices relating to directors’ meetings or resolutions can be sent has reverted to the position before the adoption of the temporary measures legislation.

Section 248D, which was repealed by the temporary measures legislation, has been reinstated so that once again directors’ meetings can only be called or held using a technology consented to by all directors and a director can withdraw that consent within a reasonable time before the meeting.

Minutes of meetings

Information that is required to be recorded in a minute book may be recorded in electronic form, if at the time of recording the information, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference. The requirement is taken to be satisfied if the method of generating the electronic form of the minute book provides a reliable means of assuring the maintenance of the integrity of the information contained in the minute book, so that the information is complete and unaltered apart form the addition of any endorsement or any immaterial change which arises in the normal course of communication, storage and display (section 253S).

Signing documents relating to meetings

The temporary measures legislation included provisions about how Companies could validly sign electronically documents relating to meetings of members or directors. Those measures have been included in the permanent changes. For information about those changes, please see our article ‘Update – Electronic executions are in, permanently[NFPiii] ’.

Matters for consideration by not-for-profit Companies

• Companies that wish to hold, or to have the option to hold, wholly virtual general meetings will have to expressly provide for this in their constitution.
• Companies that hold hybrid or wholly virtual meetings will need to ensure that the technology is capable of recording the presence of members attending virtually and allowing them to ask questions (orally or in writing) and to vote.
• Public Companies, including CLGs, will need to include in their compliance programme, the giving of an annual notice to members about their election rights or updating their website about those rights.

 Parliamentary review

This may not be the end of the story for virtual meetings and electronic communications. The new provisions, including those continuing in force under the temporary measures legislation, must be reviewed as soon as practicable after 22 February 2024 and a review report submitted to Parliament.

Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.

Link NFPi - Can not for profit companies hold virtual meetings

Link NFPii - Can charitable companies hold virtual meetings

Link NFPiii - Update - electronic signatures are in, permanently