Although a shareholder advocate has claimed the wind-down on virtual AGMS as an accountability win, the body has cautioned other reforms to disclosure laws will free directors of personal liability and leave investors in the dark.
The Australian Shareholders Association has issued a warning against Treasurer Josh Frydenberg’s move to discourage class action lawsuits.
As declared on Wednesday, Treasury will change the Corporations Act to state companies and officers will only be liable for civil penalty proceedings where they acted with “knowledge, recklessness or negligence”.
ASA chair Allan Goldin commented previously, any failure to inform shareholders of a material issue was “black and white” and companies and management were implicated.
“This was great for shareholders because they do not have insider or special interest knowledge and all they know is what they are told and they read,” Mr Goldin said.
“The fact that directors could be held personally liable was a great incentive to ensure that companies behaved in a correct manner and kept the market informed. Now the pressure is taken off.
“As ASIC says, ‘the continuous disclosure regime is a fundamental tenet of our markets’, this must not be watered down.”
The government has also extended its temporary relief measures for virtual annual meetings and electronic documents, which were introduced as the COVID crisis hit. But at the same time, it will also be conducting a 12-month opt-in pilot for companies to hold hybrid annual meetings.
The update to the temporary relief will extend the previous 21 March deadline to 15 September, allowing companies to keep virtually conducting their annual general meetings, distributing meeting-related material and executing documents.
The ASA has welcomed the hybrid format, with Mr Goldin saying it allows in-person follow-up questioning to take place.
“I personally dislike the virtual AGM that allows chairmen to effectively dodge any real questions and offer any answer they like as there is no comeback... Until 15 September,” Mr Goldin said.
“Then we return to the real world of directors and management being held accountable once a year to their owners.”
After the September deadline, member meetings will revert to requiring an in-person gathering to be held.
But the changes to electronically signing and sending documents will also be finalised prior to the deadline. The ASA has previously urged Parliament to also ensure companies distribute hard copy documents to shareholders that request them.
“[Digital] is fine if that is the default position, provided that the shareholder can still request a paper copy of notices, reports and proxy forms,” Mr Goldin said.
“Not every shareholder has or wants access to the internet so their needs must be met.”
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Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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