Preparing for the 2023 AGM season

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 2022, there was:

Following the permanent changes to the Corporations Act 2001 (Cth) (CA 2001) that came into effect in April 2022 (see the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (Meetings and Documents Act)) allowing hybrid meetings, the majority of ASX 200 AGMs were held in this format and recorded increased shareholder engagement and participation compared to traditional in-person meeting attendance levels in previous years.

A small minority of AGMs were held entirely virtually. The relief under the ASIC Corporations (Virtual-only Meetings) Instrument 2022/129 (ASIC Instrument 2022/129) that gave all listed companies the option to hold virtual-only meetings applied until 31 May 2022. Since that date, entirely virtual meetings can only be held if this is expressly required or permitted by the company’s constitution, which requires shareholder approval (for more information, see Resolution to amend the constitution to permit virtual meetings).

For more information about the ways in which a company can hold a meeting, see Practice note, General meetings: How members' meetings may be held, and for a standard form notice of general meeting that can be used where the company proposes to hold a virtual or hybrid meeting, see Standard document, Notice of general meeting (in-person, hybrid or entirely virtual meeting).

The permanent amendments made to the CA 2001 by the Meetings and Documents Act 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:

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.

For more information, see Practice note, Notices of general meeting.

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.

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.

Before sending the notice of AGM, the board 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. For more information, see Standard document, Constitution for a public company listed on the ASX: Drafting note: Election of directors.

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 30 June 2023, the percentage of women on ASX 200 boards was 36.4% and there were two all-male boards on the ASX 200 (see the Australian Institute of Company Directors (AICD) Gender diversity progress report: March 2023 to June 2023). There is room for improvement, 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 poor gender diversity, ACSI may make recommendations to vote against any new appointments, on a case-by-case basis (see ACSI website: Board diversity).

For more information on gender diversity on boards, see Practice note, Shareholder activism: Gender diversity on boards.

Before sending the notice of AGM, the board must consider any resolutions to be put to the company's members. The company may need to consider including the following types of resolutions in the notice of AGM:

Companies should release their notice of meeting (NOM) as soon as possible. This means that the company will be in a better position to:

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.

ASIC may also need to review the notice of meeting if the company is seeking approval for any related party transactions. ASIC has reminded companies to ensure that any notice of meeting documents lodged with ASIC seeking member approval to give financial benefits to related parties satisfy the requirements in Chapter 2E of the CA 2001 and Regulatory Guide 76 Related party transactions. In particular, meeting materials must provide sufficient information to members to enable them to decide if the financial benefit to be given to a related party is in the best interests of the company (see ASIC Corporate Finance Update - Issue 6, September 2021: Related party transactions).

For more information about NOMs, see Practice note, Notices of general meeting and for a standard form NOM that can be used to call a virtual or hybrid meeting, see Standard document, Notice of general meeting (hybrid or virtual meeting).

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. For this reason, boards should also:

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. Engaging early with proxy advisers allows the company to:

For more information on proxy advisers, see Practice note, Shareholder activism: Proxy advisers.

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. Engaging early with institutional investors allows the company to gauge:

For more information, see Practice note, Shareholder activism: Institutional investors and other shareholder groups.

The company's remuneration report is likely to be closely scrutinised at 2023 AGMs in relation to a number of factors that may inform shareholder voting:

See 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.

In 2022, there was a slight decrease in the number of companies requisitioned with shareholder resolutions at the AGM with the majority relating to climate change and others relating to other environmental concerns and cultural heritage protection. None of the resolutions requisitioned in 2022 were successful, probably due to a lack of support from the relevant boards and an increase in Say On Climate resolutions.

The resolutions were:

(See Checklist, Examples of shareholder-requisitioned environmental, social and governance resolutions affecting ASX 200 entities in 2022: 2022 AGMs: shareholder-requisitioned resolutions.)

With this trend likely to continue in the 2023 AGM season, companies should:

For a complete list of ASX 200 climate change-related shareholder requisitioned resolutions and their results since 2017, see Checklists, Examples of shareholder-requisitioned environmental, social and governance resolutions affecting ASX 200 entities in 2022; Examples of shareholder-requisitioned environmental, social and governance resolutions affecting ASX 200 entities in 2021; Examples of shareholder-requisitioned climate change and human rights resolutions affecting ASX 200 listed entities in 2020; Examples of shareholder-requisitioned climate change and human rights resolutions affecting ASX 200 listed entities in 2019; Examples of shareholder-requisitioned climate change and human rights resolutions affecting ASX 200 listed entities in 2018 and Examples of shareholder-requisitioned climate change resolutions affecting ASX 200 listed entities in 2017.

For more information about shareholder activism, including advisory resolutions, see Practice notes, Shareholder activism and Climate change and shareholder activism.

Remuneration was a key focus in 2022. Shareholder support for remuneration reports slightly increased for ASX 200 companies and there were fewer strikes overall. However, there was an increase in second strikes. Boards should remain prepared for remuneration strikes in 2023. Companies that received a first strike in 2022 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 2022 may face a spill resolution if it receives a "second strike" in 2023. Activist shareholders may also attempt to spill the board by voting against the company's remuneration report.

Companies that received a first strike in 2022 should prepare to respond to a potential spill resolution in 2023 by:

For information on how companies can respond to employment of the two-strikes rule, see Checklist, Key strategies for responding to an approach by activist shareholders: Responding to the two-strike rule. For more information on the two-strikes rule generally, see Practice note, Notices of general meeting: Listed companies: remuneration report: the "two-strikes" rule.

Cybersecurity is a fundamental ESG issue that could potentially have a material impact on a company's operations, revenue, costs and reputation, leading to a decline in share price and investor confidence. There have been increasing demands from investors that companies be transparent regarding cybersecurity, disclose information regarding their cybersecurity risks and incidents in their financial reports, and take proactive measures to protect their data and assets. Boards are also expected to oversee the cybersecurity strategy of the company and manage the relevant cyber risks effectively. These issues can all have an impact on shareholders' voting behaviour at the AGM.

For more information, see Practice note, Cybersecurity considerations for directors and Checklist, Cybersecurity considerations for directors. For a guide to Practical Law's content relating to the legal, practical and commercial issues associated with cybersecurity, see Toolkit, Cybersecurity.