2022 AGM Season: Guidance for Boards and Legal Advisers

Most listed companies will have begun to think about their 2022 annual general meeting (AGM), with the majority of AGMs set to occur between September and November 2022. This article sets out some key steps that a listed company can take to prepare for its AGM.

The trends that arose in the 2021 AGM season look set to continue in the 2022 AGM season. The key themes of the 2021 AGM season were:

  • A focus on environmental, social and governance (ESG) issues, with climate change risk and sustainability emerging as the most frequently raised ESG issues. In particular, the Say On Climate initiative gained momentum and some companies for the first time allowed and recommended advisory resolutions. A number of companies have committed to putting their climate action plans to an advisory vote at their 2022 AGM.
  • Strikes or near strikes on remuneration reports by shareholders. 2021 saw a record number of first strikes on companies’ remuneration reports. It is anticipated that shareholders will express their dissatisfaction with execution remuneration in the same way in 2022.
  • Resistance to proposed amendments to the company’s constitution to permit entirely virtual meetings.

1. Prepare for a board spill

A company must hold an AGM within five months of the end of the company’s financial year, and a newly registered company must hold its first AGM within 18 months of registration. In 2021, the majority of AGMs were held virtually in reliance on temporary provisions of the Corporations Act 2001 (Cth) (CA 2001) or as a hybrid meeting, with most shareholders attending the meeting virtually and only a small number of shareholders attending in person.

The majority of ASX 200 companies held virtual meetings in 2021. In 2022, boards will again need to determine the most appropriate format for the meeting. Importantly, since the 2021 AGM season, permanent amendments have been made to the CA 2001 that may affect the manner in which a company holds its 2022 AGM. In particular, a company may hold a hybrid meeting regardless of anything in its constitution. However, a company may only hold a virtual meeting (being a meeting using virtual meeting technology only) if its constitution expressly permits or requires it to do so. This may mean that in 2022 we see more hybrid than virtual meetings.

2. Determine how the notice of AGM will be sent

The permanent amendments made to the CA 2001 in April 2022 mean that a company may give documents relating to the AGM, such as the notice of AGM, to shareholders electronically. A company may give the notice of meeting electronically by either:

  • Giving the document to the person by using electronic means; for example, by sending an email.
  • Using electronic or traditional means to provide the person with details sufficient to allow them to view or download the document electronically; for example, by giving them a card or sending them an email with a link to a website.

Companies, generally via their share registry, will therefore need to decide whether to send a traditional, physical, notice of meeting to shareholders or an electronic notice. Importantly, companies must keep in mind that shareholders who have made an election to receive hard copy documents by the relevant cut-off date must be sent hard copies of the notice of AGM and other related documents. Generally, to be effective, the member’s request must have been received by the company more than 30 days before the notice of AGM is to be sent to shareholders.

3. Ensure the company’s annual report is complete and accurate

Companies are ordinarily required to complete their financial reports within three months of the end of financial year. This means that, for entities with a 30 June end of financial year, reports must be lodged by the end of September. ASX-listed entities must also include an operating and financial review (OFR). Importantly, companies should ensure that their OFR discloses key risks, including environmental and other sustainability risks (including climate risk). ASIC Regulatory Guide 247: Effective disclosure in an operating and financial review sets out ASIC’s expectations in respect of a company’s OFR.

4. Announce AGM date and closing date for director nominations (listed companies only)

ASX-listed companies must announce the date of their AGM and the closing date for receipt of director nominations at least five business days before the closing date for receipt of such nominations (ASX Listing Rule 3.13.1). Companies may have already met this requirement by giving to the ASX a calendar of key dates that includes these dates. However, companies that have not given ASX this information must do so within the required timeframe.

5. Director elections

Before sending the notice of AGM, the board of directors must determine the directors that must retire and stand for re-election at the AGM. Directors may be required to retire and stand for re-election due to provisions in the company’s constitution or in accordance with the ASX Listing Rules.

The board should pay particular attention to gender and skills diversity when considering the directors it will put forward for election or re-election and, where possible, ensure gender diversity on their board to avoid “against” votes on director election resolutions and, potentially, shareholder-requisitioned resolutions calling for the appointment of new directors. As at 31 May 2022, the percentage of women on ASX 200 boards was 34.7% and there was one all-male board on the ASX 200 (see the Australian Institute of Company Directors (AICD) Gender diversity progress report: March 2022 to May 2022). There is room for improvement, however, and shareholder groups, in particular the Australian Council of Superannuation Investors (ACSI), continue to push for increased gender diversity on boards. ACSI’s general policy is that where a company has zero women directors, ACSI may make recommendations to vote against any newly appointed male directors (see ACSI website: Gender diversity).

6. Consider necessary resolutions, including a resolution to amend the constitution to permit virtual meetings

Before sending the notice of AGM, the board must consider any resolutions to be put to the company’s members. In 2021, some companies proposed resolutions to amend their constitution to allow virtual meetings in anticipation of the permanent reforms to the CA 2001. However, while some resolutions passed successfully, some companies met resistance to the proposed amendments as a result of a proxy adviser campaign against this type of constitutional change.

In 2022, boards of companies whose constitution does not expressly permit a virtual meeting will need to consider whether to propose at their AGM a constitutional amendment to permit virtual meetings or otherwise rely on holding hybrid meetings in accordance with the CA 2001, and encouraging shareholders to attend virtually.

The company may also need to consider including other resolutions in the notice of AGM, for example the appointment or replacement of the company’s auditor or the approval of any termination benefits or employee incentive scheme.

7. Release the notice of AGM to the market as soon as possible and allow time for review, if required

Companies should release their notice of meeting (NOM) as soon as possible. For ASX-listed companies, draft NOMs that contain resolutions for Listing Rules purposes must be submitted to the ASX for review before they are sent to security holders (ASX Listing Rule 15.1.7). The ASX may take five business days to advise whether it objects to a draft document, and may extend that deadline if it needs further time to review the document (ASX Listing Rule 15.1). Listed entities should keep in mind these timing requirements and allow sufficient time to submit their draft NOMs. Companies should also consider whether ASIC will need to review the NOM (for example, if the company is seeking approval for any related party transactions).

8. Review the share register

Boards should monitor and analyse the share register, preferably well in advance of the AGM. This may help to determine whether any of the company’s shareholders are known for particular views or action and therefore more likely to engage in shareholder activism.

9. Engage early with proxy advisers

Once the NOM is released, companies can then engage with proxy advisers who are responsible for providing reports to shareholders (typically, institutional investors) that contain the proxy adviser’s voting recommendation for each resolution to be considered at the AGM.

10. Engage early with institutional investors

There is increasing pressure on institutional investors (particularly superannuation funds) to take a more active role in their investments. Accordingly, in recent years institutional investors and companies have increased their engagement in corporate governance matters. Institutional investors can be critical to the success or failure of a resolution.

11. Carefully consider the remuneration report

The company’s remuneration report is likely to be closely scrutinised at 2022 AGMs; in particular, the board’s decision to pay or not to pay executive variable remuneration. In 2021, ASIC published ASIC Information Sheet 245 Board oversight of executive variable pay decisions (INFO 245), which sets out practical guidance to support board oversight and the exercise of discretion on the variable pay outcomes of large listed companies’ senior executives.

12. Prepare to respond to shareholder-requisitioned resolutions

In 2021, shareholders of 11 ASX 200 companies requisitioned climate change or human rights related resolutions at the company’s AGM. There was also generally increasing shareholder support for resolutions on ESG issues. With this trend likely to continue in the 2022 AGM season, companies should:

  • Ensure that, where appropriate, the company’s operating and financial review and directors’ report makes appropriate disclosures relating to ESG issues.
  • Engage with key institutional investors to determine whether they intend to requisition resolutions and, if so, the substance of those resolutions.
  • Prepare announcements responding to any resolutions requisitioned under section 249N of the CA 2001. A company that has received a notice of intended resolution under section 249N must, under the Listing Rules, make an announcement within two business days of its receipt.
  • Prepare appropriate responses to any resolutions requisitioned at the AGM.
  • Consider putting forward their own resolutions relating to ESG issues.

13. Prepare for a board spill

Remuneration was a key focus in 2021, with a number of first strikes and near first strikes against the remuneration report. This trend looks set to continue and boards should remain prepared for remuneration strikes in 2022. Companies that received a first strike in 2021 should prepare to respond to a second strike.

Under the two-strikes rule, a company that received a “first strike” against its remuneration report in 2021 may face a spill resolution if it receives a “second strike” in 2022. Activist shareholders may also attempt to spill the board by voting against the company’s remuneration report.

Companies that received a first strike in 2021 should prepare to respond to a potential spill resolution in 2022.

14. Voting on a poll and reports on polls

While listed entities have been encouraged to conduct all votes at an AGM on a poll for some years, the permanent changes to the CA 2001 in April 2022 now require listed companies to conduct votes on resolutions contained in the notice of AGM on a poll. Additionally, a member or group of members with at least 5% voting power in a listed company may now require the company to appoint an independent person to observe a poll or scrutinise its outcome and prepare a report. Companies will therefore need to ensure that there are proper procedures in place to conduct all votes on a poll at the AGM and appoint an independent person to observe the poll, if requested.

For a guide to Practical Law’s resources relating to general meetings and members’ resolutions, including resources relating to calling, holding and recording general meetings, and standard form minutes of meetings and forms of resolution for specific transactions, see Toolkit, General meetings and members’ resolutions.

Practical Law subscribers can access more information on preparing for an AGM (including guidance on the logistics of holding a virtual meeting and drafting a NOM), and preparing for and responding to shareholder activism, requisitioned resolutions and board spills in the following checklists and practice notes on the Practical Law Australia site:

  • Practice note, General meetings.
  • Practice note, General meetings: members’ rights.
  • Practice note, Notices of general meeting.
  • Practice note, Shareholder activism.
  • Standard document, Notice of general meeting (in-person, hybrid or entirely virtual meeting).
  • Checklist, Environmental, social and governance risks: disclosure requirements.
  • Checklists, Examples of shareholder-requisitioned environmental, social and governance resolutions affecting ASX 200 entities in 2021.
  • Checklists, Key strategies for preparing for shareholder activism.
  • Checklist, Key strategies for responding to an approach by activist shareholders.
  • Checklist, Logistics of shareholder meetings held using technology.

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