Managing member meetings in the era of social distancing

Amongst the many challenges presented by the COVID-19 is how member-based organisations can continue to hold meetings of members, both to comply with timeframes for holding Annual General Meetings (AGMs), and to ensure that those organisations that are registered charities meet ACNC Governance Standard 2 requiring charities to take reasonable steps to be accountable to their members.

With the Federal Government prohibiting public gatherings of more than 2 people, member-based organisations which usually have a quorum of 3 members are currently restrained from being able to meet the quorum requirement in order to proceed with a physical meeting.

Time frames to hold an Annual General Meeting

Incorporated associations

Incorporated associations in Queensland are required by legislation to hold their AGMs within 6 months after the end of their financial year.^[1] For incorporated associations whose financial year ends on 31 December, they will be required to hold their AGM by 30 June 2020. This legislative requirement is also contained in the Model Rules, so it is likely that most rules for incorporated associations will also require the AGM to be held within this time frame.

Meeting this requirement by calling and holding a meeting of members will be affected by the current home confinement direction presently in force in Queensland which would prevent individuals from physically attending a meeting.

Companies limited by guarantee that are not registered charities

The Corporations Act requires companies limited by guarantee (CLG) to hold a AGM at least once each calendar year and within 5 months after the end of its financial year. ^[2] The financial year for some CLGs may also end on 31 December, meaning that they are required to hold their AGM by 31 May 2020.

As with incorporated associations whose financial year ends on 31 December, meeting this requirement will difficult given the current isolation measures.

Companies limited by guarantee that are registered charities

CLGs that are registered as charities are not bound by the meeting provisions in the Corporations Act^[3] but rather Governance Standard 2 under the ACNC Act, which requires charities to take reasonable steps to be accountable to their members and provide them with adequate opportunity to raise concerns about the governance of the charity, will apply.

Unlike the Corporations Act, Governance Standard 2 does not require a charity to hold an AGM in order to meet the required standard, so there is no mandated time frame to consider.

However, the constitution of a CLG which is a registered charity could impose an obligation for the CLG to hold an AGM each year and specify a time frame in which it must be held.

Options for those required to hold a meeting of members

Utilisation of technology

Your organisation may need to proceed with holding a meeting of members, either to comply with its obligations to hold an AGM, or perhaps for members to consider certain special business, like a proposal to amend the constitution, or merge with another organization.

In these circumstances, you will need determine whether the meeting can proceed through technology, such as WebEx or Zoom, or even over a teleconference.

The first port of call is your organisation’s governing document (otherwise known as rules for incorporated associations, or constitution for CLGs).

If your governing document allows for the use of technology to hold meetings in 2 or more places, then you can conduct the meeting through technology. This will generally apply to all incorporated associations because rule 37(1) of the Model Rules allows for the use of technology.^[4]

There is no equivalent provision for CLGs, so unless your constitution expressly allows for the use of technology, you will not be able to employ any technology to allow your meeting to proceed. These days it is common for CLG constitutions to allow for technology so if your constitution does not, it could be an indication that your constitution is due for a review.

ASIC “no-action” reprieve for CLGs that are not registered charities

For CLGs that are not registered charities and are required to hold their AGM by 31 May, and are not able to hold a meeting via technology under their constitution, ASIC’s “no-action” position may provide some reprieve.

ASIC has recently released guidelines for companies to meet upcoming AGM and financial reporting requirements and advises that it will:

• not take action against CLGs which breach their constitutions by holding a meeting in person and partially online or entirely online; and
• allow CLGs to defer the time frame for AGMs from 31 May to 31 July, despite this being in breach of their legal requirements.

However, ASIC’s relaxed regulatory approach will not prevent a troublesome member from complaining.

ACNC guidance

10. The ACNC has recently released guidance for registered charities regarding their operations during the COVID-19 crises.
11. In relation to the timing of AGMs, the ACNC has stated that if a charity postpones its AGM (presumably in breach of its constitution), the ACNC will not take further action against the charity unless there is “evidence of wider non-compliance”.

Reprieve by Office of Fair Trading

In recognition of the difficulties faced by incorporated associations in meeting their meeting time frames, the Office of Fair Trading has recently announced that “in the current circumstances, we will allow a grace period of a further 6 months to hold your AGM, if required, without the need for you to make a written application“.

Key takeaways and tips

If your organisation needs to hold a meeting whilst the social isolation measures are in force, you should:

• Review your governing document or governing legislation to determine if you can hold the meeting remotely.
• If you cannot use technology, and decide to post-pone the meeting, be transparent with your members regarding the limitations in place and the decision to post-pone the meeting. Also consider other ways in which you can be transparent with your membership in the meantime, e.g. online Q&A session. Also, consider whether the regulator has relaxed its approach in the short term.
• If you can use technology, source a software solution that works for you. In proceeding, make sure that:
  • The selected technology gives members as a whole a reasonable opportunity to participate in the meeting, e.g. ability to cast a vote, ask questions, etc. If this is not possible, the board should consider allowing questions to be asked in advance and encourage the use of proxy forms to cast votes;
  • Proper notice of the meeting is given in the required form;
  • If the technology is new to your organisation, implement a practice run to ensure it will be working on the day and any issues ironed out;
  • The chair prepares and delivers clear rules of engagement to ensure that the meeting progresses smoothly, e.g. participants should mute microphones when not in use etc.

[1] Section 55, Associations Incorporation Act 1981 (Qld).

[2] Section 250N(2), Corporations Act 2001 (Cth).

[3] Section 111L, Corporations Act 2001 (Cth).

[4] Under the Associations Incorporation Act 1981 (Qld) the Model Rules are deemed to be incorporated into the rules of an incorporated association, unless there is an express provision to the contrary contained in the rules.