Getting business done during lock down - how your governing documents allow you to get on with business during COVID-19

In an effort to reduce the spread of COVID-19, the Federal government has advised that non-essential gatherings must be cancelled. It goes without saying that this presents challenges and feelings of uncertainty amidst businesses that are required to hold meetings (among other duties) in the coming weeks and/or months.

This article outlines:

• How businesses can hold meetings, issue notices and sign documents to help them make decisions without face-to-face meetings; and
• how Cleardocs documents accommodate these measures.

Meetings

Social distancing and lock-down rules should not be regarded as preventing businesses from getting on with decision making and proper governance.

ASIC has said as much, in its guidance to listed entities whose financial year ends on 31 December. For those companies with a 31 December financial year end, ASIC has advised it will not take action against those companies where:

• Their AGM is postponed up to the end of July;
• Their AGM is held as a "virtual meeting"; and
• Supplementary notices are issued to shareholders no later than two business days prior to the scheduled date of the meeting providing instructions for online participation.

In support of this, ASIC advises that where entities have a constitution restricting online participation in an annual meeting, or that cannot otherwise provide effective online participation, those companies can rely on ASIC's "no action" position to defer annual meetings.

Entities should review their governing documents and corporate structure to determine how they can get on with business. The Cleardocs documents allow you to carry on meetings using technology in the following ways:

• Companies and Trusts: Any meeting of a company's directors - and a trustee company's directors - must be held in accordance with that company's constitution. The Cleardocs Company Constitution document (which governs companies and Trustees of trusts where the Trustee is a corporation) allows a meeting of directors to be convened at different venues, provided the technology used gives the directors at each venue a reasonable opportunity to participate. This means that meetings can be held by phone and other digital platforms such as Zoom, Skype, Microsoft Teams etc.
• SMSFs: The Cleardocs SMSF Trust deed allows the trustee to hold meetings by phone, and given all the different platforms available on phones these days, there is no excuse for not convening meetings of trustees.
• Unit Trusts: unit holder meetings are not required to be held where a resolution is passed which is signed by all the unit holders entitled to vote at a meeting of unit holders. This is valid and effective as if a meeting was in fact held. The resolution can be signed in counterparts and sent electronically to all the unit holders for signature by relying on the Electronic Transactions Act 1999 (Cth).

Signing documents and making decisions

Particular Cleardocs documents allow decisions to be made electronically. In some instances, the law requires that documents be signed in the presence of a witness and this cannot be achieved electronically - to date, no new laws have been effected to make this easier during the current COVID-19 isolation measures – but there are still ways and means.

When establishing a company or a trust, the relevant documents need to be signed by the parties. In the case of a company signing under section 127 of the Corporations Act 2001 (Cth), the company director/s cannot sign the document electronically as the law does not permit the company signing in this way to rely on the Electronic Transactions Act 1999 (Cth). Therefore, to avoid any issues, when establishing a trust or company you should always sign in wet ink on a printed form of the document. Those signed documents can then be scanned and circulated as evidence that the documents have been properly signed.

The Cleardocs signing and decision-making requirements for various documents can be summarised as follows:

• Company: circulating resolutions of the directors of the company can be signed in counterparts provided that all directors sign. Therefore all directors do not need to be present to sign the same document.
• Discretionary Trust: given that the members of a discretionary trust have no defined interest in the trust, the only meetings required to be held are those of the trustees. Where the trustee is a company then the constitution will govern its decision making requirements – which can be done by circulating resolution without holding a meeting. Otherwise all trustees should sign a document which records they are in favour of resolutions proposed.
• Partnership Agreement: allows the partners to record a decision (e.g to remove a partner, to make a fixed draw etc) by notice in writing and have all partners sign the notice. This can be done electronically.
• Unit Trusts: unit holder meetings are not required to be held where a resolution is passed which is signed by all the unit holders entitled to vote at a meeting of unit holders. This is valid and effective as if a meeting was in fact held. The resolution can be signed in counterparts and sent electronically to all the unit holders for signature by relying on the Electronic Transactions Act 1999 (Cth).
• SMSF Death Benefit Agreements and Death Benefit Nominations: A Death Benefit Nomination requires the signature of a member making the nomination to be witnessed by two independent adults neither of whom are mentioned in the Death Benefit Nomination. You can have these witnessed by two adults that you reside with, your neighbours or if this is not achievable most pharmacies, police stations and post offices are open and you can attend to have your signature witnessed there. A Death Benefit Agreement does not require witnessing.
• Wills: when signing a Will, the signature of the will-maker needs to be witnessed by two independent adult witnesses preferably who are not named in the Will (if the will is made in Victoria, it would be okay if a witness is named in the Will). Therefore, you can have the document witnessed by two adults that you reside with, your neighbours or if this is not achievable most pharmacies, police stations and post offices are open and you can attend to have your signature witnessed there.
• Enduring Power of Attorney (Medical Treatment) in Victoria: When signing this document it must be witnessed by two adults.
  • At least one witness must be unrelated to: the person giving the power, the agent/guardian/attorney and any alternative agent/guardian/attorney.
  • At least one witness must be a person authorised to witness the signing of a statutory declaration, e.g. a solicitor or a police force member.
• Enduring Power of Attorney (financial matters or personal matters or both) in Victoria: when signing this document it must be witnessed by two adults.
  • At least one witness must be a person authorised to witness the signing of a statutory declaration, e.g. a solicitor or a police force member.
  • In addition, both witnesses must not be:
    • An attorney/alternative attorney under the document;
    • A relative of:
      • The principal,
      • Attorney appointed; or
      • Alternative attorney appointed; and
    • A care worker or accommodation provider for the principal.

Notices of meetings

The various Cleardocs documents such as the Discretionary Trust, Unit Trust, Company Constitution, Shareholders Agreement and Partnership Agreement allow notices of meetings to be sent by electronic means e.g. email.

The Company Constitution also allows the company to give notice to members through an online platform and to direct members as to how to access the material e.g Dropbox, website portal.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.