It seems we are all now experts at Zoom meeting participation, courtesy of the COVID19 coronavirus.  But such electronic wizardry just got a little more complicated for insolvency practitioners.

The Federal Treasurer issued a “Determination”[1] on 5 May 2020 that now permits meetings under the Corporations Act to be held electronically.

“So??” you properly ask. Insolvency practitioners have long been able to convene and conduct meetings of creditors electronically[2].  Now, the Determination requires that votes taken at an electronic meeting “must be taken on a poll, and not on a show of hands, by using one or more technologies to give each person entitled to vote the opportunity to participate in the vote in real time and, where practicable, by recording their vote in advance of the meeting”[3].

Prior to this Declaration, a resolution in a meeting could be declared carried “on the voices”[4], unless a poll was called for. This option is no longer an option for electronic meetings.

Any notice sent to participants in a meeting must also include “information about how those entitled to attend can participate in the meeting (including how they can participate in a vote taken at the meeting, and speak at the meeting, to the extent they are entitled to do so).” [5]  That is certainly more than insolvency practitioners have been required to do in the past. For meetings to be held after 5 May 2020, the previous notices need to be checked to make sure they included the requisite information. If not, a fresh notice must be sent to participants at least 7 days before the meeting[6].

So, should insolvency practitioners include a poll voting slip in their notices?  Does the slip need to be completed prior to the meeting, since any vote must be on a poll basis anyway?  If so, what does that do to a general proxy’s power to vote any way he/she sees fit?  Won’t the chair of the meeting know the outcome of voting before the meeting is even held?  And how will voting be managed electronically where there are potentially hundreds of creditors attending?

I can envisage a case where, at an electronic meeting of creditors, if an insolvency practitioner does not count the votes on a poll basis, and yet declares a resolution carried (or not), then technically, that resolution is invalid.  Of course, that requires a Court application to remedy, or another meeting!

Carrying a resolution by a poll is also much more burdensome: it requires not only a majority in numbers of people voting, but also a majority in the value of the amounts each creditor is owed by the insolvent company. If there is a deadlock, e.g. a majority in the number of creditors voting vs a majority of the value of the debts owed, the chair (invariably the insolvency practitioner) has a casting vote[7]. Insolvency practitioners are reminded that helpful guidance on exercising the casting vote can be found in section 24.7.4 of the Code of Professional Practice for Insolvency Practitioners issued by the Australian Reconstruction Insolvency and Turnaround Association.

Bear in mind, this Determination only applies to electronic meetings.  Meetings can still be held in person, subject to the various States’ and Territories’ social distancing requirements – which seem to change week by week!  I’m not sure what would be more difficult: holding a meeting in person spreading everyone 1.5 metres apart, or a completely electronic meeting calling for a poll on every resolution?

The Declaration also addressed the ability of companies to sign documents electronically, though certain documents, such as deeds for example, will still require “wet” signatures.

The Declaration is already repealed 6 months after the day it was made, i.e. 6 November 2020.  I cannot see too many insolvency practitioners hoping this change in the meeting process remains in place beyond then.

 

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article

[1] Corporations (Coronavirus Economic Response) Determination (No. 1) 2020, made under section 1362A of the Corporations Act.

[2] E.g. See section 600G of the Corporations Act and Division 75 of the Insolvency Practice Rules (IPR)

[3] Section 5(1)(c)

[4] IPR Rule 75-110

[5] Section 5(3)(a)

[6] Section 5(3)(b)

[7] Except where the vote relates to the remuneration of the insolvency practitioner, or the removal of the insolvency practitioner – IPR Rule 75-15(3)

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article