With the 2012 AGM season rapidly approaching, it is again time for Boards of ASX listed companies to turn their minds to the resolutions to be put to shareholders for approval.

We highlight below the recent changes that may have an impact on the 2012 notice of AGM, and include a checklist of resolutions that Boards should consider when preparing the notice.

KEY CHANGES IN 2012

The significant changes to the AGM landscape in 2012 are:

  • The ability of small and mid-cap companies to increase their placement capacity from 15% to 25% under new Listing Rule 7.1A.
  • The inclusion in the notice of meeting of a "spill resolution" if the company's remuneration report received a "no" vote of 25% or more at its 2011 AGM.

INCREASE OF PLACEMENT CAPACITY TO 25%

Listing Rule 7.1A was introduced with effect from 1 August 2012, and allows small and mid-cap companies to seek a mandate from their shareholders each year to allow them to issue a further 10% of their issued capital in addition to their existing 15% placement capacity under Listing Rule 7.1.

To be eligible to take advantage of this new rule, the company must not be included in the S&P/ASX 300 Index and must have a market capitalisation that is equal to or less than $300 million.

A special resolution of shareholders is required in order to utilise the additional 10% placement capacity. Listing Rule 7.3A outlines the information that must be provided to shareholders when seeking approval, which includes the minimum price at which the securities will be issued, the purpose of the issue and the allocation policy for the issue.

The approval, once obtained, will be valid for 12 months from the AGM, unless there is a significant change to the nature or scale of the company's activities, or a disposal of the company's main undertaking, which require shareholder approval under the Listing Rules.

For further information on increasing placement capacity please click here

SPILL RESOLUTION – TWO STRIKE RULE

If a company's remuneration report received a "no" vote of 25% or more at its 2011 AGM, it will be necessary for the company's 2012 notice of AGM to include a spill resolution, as required by the two strike rule.

If, at the 2012 AGM, a company's remuneration report again receives a "no" vote of 25% or more, the spill resolution must be put to shareholders.

A spill resolution is an ordinary resolution to the effect that:

  • The company hold another general meeting within 90 days (referred to as the "spill meeting").
  • The directors (other than the managing director) who held office at the time when the resolution to make the Directors' Report considered at the 2012 AGM was passed, cease to hold office immediately before the end of the spill meeting.
  • Resolutions to appoint persons to offices that will be vacated immediately before the end of the spill meeting be put to the vote at the spill meeting.

The company's proxy form will need to contemplate that a spill resolution may be voted on at the 2012 AGM.

CHECKLIST

This checklist contains a general, non-exhaustive overview of the resolutions that Boards should consider when preparing their 2012 notice of AGM.

Item Overview Type of resolution
Remuneration report Adoption of the 2012 remuneration report. Ordinary
Spill resolution To be put to the AGM if a second "no" vote of 25% or more is received for the resolution to adopt the remuneration report (see notes above). Ordinary
Rotation of directors

A director (excluding the managing director) must not hold office past the third AGM following the director's appointment or three years, whichever is the longer.

These directors must retire from office, however may be re-elected at the AGM.

 Ordinary
Election of directors

Any director who has been appointed to fill a casual vacancy must retire from office at the next AGM.

These directors may be re-elected at the AGM.

 Ordinary
Refresh 15% placement capacity To approve issues of securities made by the company in the past 12 months under its 15% placement capacity, so that the placement capacity is "refreshed" and available for use. Ordinary
Increase 15% placement capacity to 25% To increase the company's placement capacity to 25% (see notes above). Special
Item Overview Type of resolution
Refresh employee incentive scheme To approve the issue of securities under an employee incentive scheme so that those issues do not count towards the company's 15% placement capacity. The scheme must be approved every three years. Ordinary
Approve issue of securities to directors and other related parties To approve the issue of securities to directors and other related parties. Ordinary
Approve termination payment To approve payment of a termination benefit to a person in a managerial or executive office if the amount of that benefit exceeds the amount permitted under the Corporations Act. Ordinary
Refresh proportional takeover provisions

A proportional takeover bid is a bid to buy a specified portion of each shareholder's shares. A company's constitution may contain proportional takeover provisions that prevent a bidder from obtaining control of the company without shareholders having the opportunity to sell all of their shares.

The proportional takeover provisions must be renewed every three years.

 Special
Increase the total remuneration payable to non-executive directors To increase the total remuneration payable to nonexecutive directors. Ordinary

In addition to those resolutions set out above, if the company is considering a substantial transaction or a transaction that affects the company's share capital, it will need to consider whether shareholder approval is required.

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