News & Insights

AGM Season 2019. Calendar - 29 November

AGM Season 2019: Preparing the notice of AGM

Authors: Deanna Carpenter, Nick Harrison

With the Annual General Meeting (AGM) season soon to arrive, we would like to remind listed companies with a 30 June year end of the requirement to hold their AGM by 30 November 2019 and to set out some of the considerations that should be taken into account in preparing the notice of AGM.

Timing for Annual General Meetings

The notice of AGM, accompanying explanatory memorandum and proxy form (Meeting Materials) need to be prepared, printed and sent to shareholders with sufficient time to hold the AGM by no later than 29 November 2019 (as 30 November this year is a Saturday).

A summary of the process, order and timing for convening the AGM for listed companies is below. This timing may be longer or shorter depending on the number and type of resolutions to be approved and whether ASX and/or ASIC approval is required:

* Additional time should be allowed to obtain any ASX waivers required.

** The Corporations Act requires final and signed Meeting Materials to be lodged with ASIC, not draft documents.

*** Depending on the company’s constitution, the Meeting Materials will be deemed to be received by shareholders within a specified period of time after they are sent.

If you haven’t already, we recommend you start preparing your Meeting Materials now, with the aim of having a final draft by the end of September at the latest.

Updated ASIC fees – approval for financial benefits to related parties

If you require shareholder approval to give financial benefits to related parties, final (not draft) Meeting Materials should be provided to ASIC as soon as possible after the receipt of confirmation that ASX has no objections to the Meeting Materials.

ASIC’s fee for reviewing Meeting Materials seeking approval to give a financial benefit to a related party (ie approvals under Chapter 2E of the Corporations Act) is $802. ASIC has revised the application fee for an abridgement of the 14 day review period. The fee has been reduced to $130 (from $3,487 in the 2018 AGM season). ASIC has stated that this revision more accurately reflects the regulatory cost associated with granting this type of relief.

Resolutions to consider for Annual General Meetings

We have set out below a number of common resolutions which you may wish to consider for this year’s AGM:

Director resolutions

(a)             Re-election of directors

Consider whether any directors appointed to fill a casual vacancy are required to be elected by shareholders and which directors are required to be re-elected by rotation. Generally, a third of the directors must stand for re-election, with directors not holding office (without re-election) past the third AGM after their appointment.

(b)             Increase non-executive director fee pool

Consider the current maximum total aggregate amount of fees payable to non-executive directors and whether this amount needs to be increased – if it does, shareholder approval will be required under Listing Rule 10.17.

(c)             Issue securities to directors

Consider whether any securities are to be issued to directors under Listing Rule 10.11 (general issues to related parties) or Listing Rule 10.14 (issues under an employee incentive scheme such as an employee share option plan (ESOP) or performance rights plans (PRP)), and whether the company will seek shareholder approval under section 208 of the Corporations Act or rely on an exception (eg arm’s length terms or reasonable remuneration). Please note that if the company intends to issue securities to directors in lieu of cash director fees, an ASX waiver may be required. It is also important to consider whether approval may also be required pursuant to section 200B of the Corporations Act in relation to benefits which may be given in the future in connection with the director’s retirement from office, such as the accelerated vesting of incentive securities.

Securities resolutions

(a)             Ratify previous security issues

Consider seeking shareholder approval to ratify any securities issued during the previous year without shareholder approval. Shareholder approval will “refresh” the company’s placement capacity under Listing Rule 7.1 by allowing the company to issue up to its full 15% placement capacity during the 12 months from the date of the AGM. Ratification can also be sought for issues made under the expanded 10% placement capacity under Listing Rule 7.1A.

(b)             Approve 10% placement facility

Companies which have a market capitalisation of $300 million or less and are not included in the S&P/ASX300 Index can seek shareholder approval to issue an additional 10% of their issued capital over a 12 month period pursuant to Listing Rule 7.1A. This approval must be sought at each AGM for issues for the following year. Details of all securities issued since last approval must be included, even if they have already been ratified or were issued with shareholder approval.

(c)             Approve upcoming capital raisings

Consider seeking shareholder approval under Listing Rule 7.1 for any capital raisings likely to occur in the three months following the AGM so as not to use up the company’s 15% placement capacity under Listing Rule 7.1 or 10% placement capacity under Listing Rule 7.1A (if applicable).

(d)             Approve/renew employee incentive schemes

Employee incentive schemes such as an ESOP or PRP must be refreshed every three years in order for issues made under those schemes not to be counted towards the company’s 15% placement capacity under Listing Rule 7.1. It is also important to consider whether approval ought to be sought under section 200B of the Corporations Act, to ensure that any accelerated vesting.

(e)             Consolidate securities

Consider the company’s capital structure and whether it is appropriate to undertake a share consolidation.

Other resolutions

(a)             Two strikes resolution

Consider whether a specific resolution is required for a “two strikes” resolution – this will be necessary if more than 25% of the eligible votes cast were against the remuneration report at last year’s AGM.

(b)             Proportional takeovers resolution

If there is a provision in the company’s constitution regarding proportional takeovers, this must be renewed every three years by special resolution (ie 75% majority of shareholders). A proportional takeovers provision allows a company to refuse to register a transfer in relation to a proportional takeover bid (ie a bid where the bidder seeks a certain percentage of each shareholder’s parcel) until such time as the bid is considered by shareholders.

(c)             New constitution

Consider how old the company’s current constitution is and whether to replace it with an up-to-date constitution incorporating changes to the Corporations Act and Listing Rules (eg dividend payments, fees for registration of off-market transfers, and minimum shareholdings).

ASIC’s observations

Boards should also consider the emerging shareholder trends and corporate governance issues identified in ASIC’s report on last year’s AGM season for ASX 200 listed companies (ASIC REP 609).

Executive remuneration

Shareholders have continued to voice concerns about the amount, structure and transparency of executive remuneration. Boards should be aware of the emerging theme of board accountability, particularly in light of an increase in first strikes on remuneration reports over the 2018 AGM season.

Shareholder engagement

ASIC observed a strong display of shareholder engagement, with director remuneration and re-elections attracting material “against” votes and an increased shareholder focus on environmental, social and governance issues. Boards are reminded to proactively engage with shareholders leading up to their AGM.

Extending the AGM deadline

If you are unable to hold your AGM before the deadline, you may apply to ASIC to extend the time in which you can hold your AGM. The application should be made well in advance, in order to be able to hold the AGM within the original deadline in the event the application is refused (or otherwise risk defaulting under the Corporations Act). Generally, these extensions are only granted where there are circumstances outside of the Company’s control.

Upcoming changes

In November 2018, ASX released a consultation paper ‘Simplifying, clarifying and enhancing the integrity and efficiency of the ASX Listing Rules’ which sought feedback on a major package of proposed listing rule amendments. Feedback has now been received, and ASX has advised that it expects to release a response to this consultation and the final version of the listing rule changes in late September/early October 2019. These rule and guidance changes are expected to take effect from 1 December 2019. This will require companies to update their Meeting Materials for the 2020 AGM season.

Please contact us if you have any queries in relation to AGM requirements or if you would like any assistance drafting or reviewing your company’s Meeting Materials for this year’s AGM.

For more information, please contact: