The Australian Securities and Investments Commission (ASIC) has released new guidelines targeted at providing comfort to corporations experiencing difficulty in meeting regulatory requirements in the wake of the COVID-19 pandemic. The measures are a welcome recognition by the corporate regulator that the current climate may temporarily impact on a company’s ability to hold an annual general meeting (AGM) or comply with financial reporting obligations.
Annual General Meetings
It is a requirement under the Corporations Act 2001 (Cth) (Corporations Act) for public companies to hold an AGM at least once in each calendar year and within five months after the end of its financial year. This obligation is creating concerns for entities with a 31 December balance date which may encounter difficulty holding their AGM by 31 May 2020 due to restrictions on large gatherings and travel.
To alleviate these concerns, ASIC has adopted a two-month ‘no-action’ position for entities with a financial year end of 31 December 2019 that have upcoming AGM requirements. The ‘no-action’ position means that ASIC will not take action against these entities who fail to hold their AGM by 31 May 2020, provided the entity holds the AGM by 31 July 2020 or such later date as ASIC advises.
ASIC has additionally supported the holding of AGMs using appropriate technology. This may include a ‘hybrid’ AGM (where there is a physical location and online facilities) or a ‘virtual’ AGM that is conducted solely online. ASIC considers that hybrid AGMs are permitted under the Corporations Act but suggests entities check whether their Constitution restricts meetings being held in this way.
Financial reporting obligations
ASIC is monitoring developments that may impact financial reporting requirements. This includes engaging in meaningful discussions with market participants and auditors, and considering possible impacts and responses. There appears to be no widespread indications of any significant issues for entities in meeting their full-year and half-year financial reporting obligations at 31 December 2019.
Entities with 31 March 2020 or 30 June 2020 balance dates
Whilst these measures are designed to afford regulatory relief to entities with a 31 December 2019 balance date, ASIC has indicated that it will carefully monitor how market conditions and COVID-19 are affecting financial reporting and AGM obligations for entities with 31 March 2020 or 30 June 2020 balance dates, and may update their guidance if needed.
What to consider for your business
The outbreak of COVID-19 has resulted in far-reaching implications in how Australians conduct their day-to-day operations. Boards should actively monitor the current environment as it relates to their business and in particular its ongoing compliance, legal and operational requirements.
Boards of public companies should consider the following questions and seek advice if in doubt:
We are available and committed to assist your business to navigate these unprecedented times and encourage you to contact us to discuss your position and the options that are available.
Article written by David Callaghan (Partner) and Callum Gribbin (Solicitor).
"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."