In the wake of COVID-19 and temporary relief measures that were introduced in May, the government has now released draft legislation proposing to make the changes permanent. In addition to entrenching the existing relief provisions allowing virtual meetings and electronic execution, the exposure draft, which was released on 19 October 2020, goes further, proposing additional enhancements to better ensure and enable corporate accountability and transparency.
Background
As it stands, the Electronic Transactions Act 1999, which facilitates the use of technology and electronic transactions, does not apply to the Corporations Act 2001 (Corporations Act). This has meant that documents executed by a company require the parties to physically sign the same document. There have also been constraints on companies in convening and conducting meetings using technology (as opposed to face-to-face).
These challenges were exacerbated by the COVID-19 pandemic, with movement and public gathering restrictions preventing people from meeting and increasing reliance on technology to conduct business. As a result, the Treasurer exercised temporary powers under the Corporations Act to modify these restrictions, allowing meetings to be held and documents signed electronically.
Companies have been calling for these changes long before COVID-19, but the pandemic has provided a case study demonstrating the value and efficiencies they offer, prompting the government to make these changes permanent. It follows similar interim recommendations made by the Senate Select Committee on Financial Technology and Regulatory Technology, which we discussed here.
What are the proposed changes?
The draft bill proposes to allow the use of electronic means of alternative technologies to:
- execute company documents and documents relating to meetings
- hold company meetings, whether directors, shareholders (including Annual General Meetings) or members of a registered scheme
- provide notices of meeting (and other related attendee documents)
- record, keep and provide minutes.
The changes pertaining to minutes were not previously addressed by the temporary COVID-19 relief measures. It is proposed that the bill will take effect immediately following assent.
Do you agree with the changes?
The government is currently inviting stakeholders to comment on the draft legislation, with a short window for public consultation set to run until 30 October 2020. Details on how to make a submission can be found here.
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