29 April 2020

How Will Your NFP Hold Its AGM During COVID-19?

Greg Moroney
Greg Moroney Commercial Lawyer

Because of COVID-19, Federal, State and Territory governments have imposed restrictions on how and where persons may gather including but not limited to quarantining, social (physical) distancing, border closures et cetera. Such restrictions will impact how Annual General Meetings (AGM) may be held while such restrictions are in place.

Not-For-Profit’s (NFP) generally fall under one of the following two legal regimes:

They are also likely governed by the Australian Charities and Not-For-Profits Commission Act 2012 (ACNC Act) if they have a charitable purpose and meet other criteria.

In any case, your NFP will be governed by its Rules or Constitution and by the applicable legislation.

Corporations Act 2001 

The Corporations Act mandates that a public company must hold its AGM at least once in each calendar year and within five months after the end of its financial year.

However, section 111L of such Act relieves bodies corporate of a number of provisions and relevantly for the purpose of this article, the provisions relating to the holding of Meetings of Members where those bodies corporate are registered under the ACNC Act.

On the premise that your NFP is registered under the ACNC Act your organisation’s obligation to hold an AGM will be directed by its Constitution. The template Constitution published by the ACNC provides that an AGM must be held at least once in every calendar year. Accordingly, there should be an opportunity to hold your AGM in the manner previously adopted by your NFP.

If, however, the Constitution of your NFP contains more demanding provisions for the timing of the AGM you will need to establish if there is a provision in the Constitution for the use of technology. Accordingly, if your NFP has utilised the ACNC template constitution or has similar provisions your AGM can be held any time before 31 December 2020. It is debatable if such provision entitles the company to hold a “virtual” AGM. However, the holding of what is referred to as a “hybrid” AGM, meaning there are some parties assembled in a physical location while other members participate in the AGM by audio and/or video conferencing, may be possible.

So what are the constraints on holding a “hybrid” AGM? The following potential difficulties are identified: –

  1. technological challenges inherent in managing many people in diverse locations;
  2. voting on motions. The ACNC template Constitution permits voting to be conducted and decided by:
    (a) a show of hands
    (b) a vote in writing, or
    (c) another method is chosen by the chairperson that is fair and reasonable in the circumstances;
  3. undertaking a vote in writing if demanded by the requisite number or percentage of members present or deemed to be present for the AGM.

Associations Incorporation Act 1981 Qld (Associations Act)

Pursuant to section 55 of the Associations Act an incorporated association must hold its annual general meeting within 6 months after the end date of the association’s reportable financial year. Accordingly, for those associations whose financial year ended on 31 December 2019 its AGM is to be held by 30 June 2020. Accordingly, the AGM is likely to be required to be held while Queensland is still being impacted by the coronavirus.

The Associations Act provides that the rules of an incorporated association may permit the Association to hold meetings or permit members to take part in its meetings, by using any technology that reasonably allows members to hear and take part in discussions as they happen. The Model Rules in Schedule 4 of the Associations Incorporation Regulation 1999 contain such provision. If your Rules do not contain that Model Rule or a similar provision, the AGM may only proceed with members personally or by proxy present at the venue where the AGM is to be held and observing the constraints of social (physical) distancing and/or assembly. In the absence of any such provision, serious consideration should be given to ultimately amending the Rules by means of a special resolution to incorporate such provision for the use of technology in or about the calling and holding of the AGM. Any such amendment is valid only if it is registered.

Grace Period for Your AGM

In Queensland, the Associations Act is administered by the Office of Fair Trading (OFT). The Chief Executive OFT has exercised his power to “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”. The Chief Executive notes that “In effect, this may result in a management committee’s term being longer than is described in the rules, but, given the current circumstances, we hope members will be accepting of this”. The Chief Executive’s directive does not contain a sunset clause but prudence would dictate that an NFP should only avail itself of the period of grace while the coronavirus is still impacting the holding of an AGM.

In effect, if your NFP’s financial year ended 31 December 2019 it has until 31 December 2020 to conduct its AGM. If, however, your NFP has a financial year ending 30 September 2019 it would only have until 30 September 2020 to hold its AGM. In this last-mentioned example, your NFP has two options if social distancing and restrictions on assembly continue:-

  1. apply to the chief executive officer for an extension of time to hold its AGM, or
  2. conducting its AGM by use of technology if so permitted by its rules. In this respect the observations above relating to NFP companies are apposite.

The Impacts of COVID-19

The COVID-19 pandemic is having a profound impact on society’s functioning. While the measures and timing of measures implemented by various governments may vary, their priority is clearly the preservation of life. What is also clear is that the legislators and those administering the legislation are taking steps, where they can, to facilitate or postpone obligations under relevant legislation.

Accordingly, you should keep a close eye on the above-mentioned legislation for any relief in the short to medium term.

If you would like to discuss this article in more detail, please contact Greg Moroney from our Business Advisory team.

 

 


Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).

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