AGMs and COVID-19 restrictions
Many entities in New Zealand are due to hold their annual general meeting (AGM) by the end of September. COVID-19 Alert Levels may impact on how these meetings are held.
The Companies Act 1993 (Companies Act) requires the board of a company to call an annual meeting of its shareholders no later than six months after the balance date of that company or, for new companies, within 18 months of registration. As many companies in New Zealand have a balance date of 31 March, they are required to hold their AGM by the end of September.
Many other entities, such as incorporated societies and charities, are also due to hold their AGMs in September. In many cases, planning for these AGMs was well underway before the move to Alert Level 4 last month.
Restrictions imposed by the current COVID-19 Alert Levels may require these entities to change the way in which their AGM is held.
This is particularly the case at Alert Levels 3 and 4, which restrict personal movement. Restrictions on gatherings and requirements for physical distancing at Alert Level 2 may also prevent larger entities from meeting in person.
During last year’s lockdown in March 2020, temporary legislation was introduced which allowed the use of electronic means to do certain things that an entity’s constitution or rules would otherwise prevent. Temporary legislation also exempted companies affected by COVID-19 from complying with certain obligations under the Companies Act, including the obligation to hold an annual meeting of shareholders.
This temporary legislation expired on 31 March 2021, therefore entities with a balance date of 31 March will not be able to postpone their AGM beyond 30 September 2021 and will need to consider how such meetings can be held.
In the absence of further temporary legislation, the options available to an entity will largely depend on its constitution or rules.
If shareholders or members are unable to meet in person then, depending on the nature and size of the entity and its governing rules, the entity may be able to hold the meeting remotely by audio, audio-visual or electronic means (such as Zoom or MS Teams).
If its constitution or rules do not allow for meetings to be held remotely, entities may need to consider whether changes can be made to its rules to allow for this. A barrier to this is that often a meeting is required to resolve to amend its rules or constitution.
For closely-held companies, other options available under the Companies Act may include:
- Written resolution: The shareholders may be able to pass a written resolution in lieu of a meeting.
- No meeting: The board may resolve not to hold an annual meeting of shareholders under the Companies Act if:
- there is nothing to be done at the meeting;
- the company’s constitution does not otherwise require the meeting to be held; and
- the board resolves it is in the best interests of the company in accordance with the Companies Act.
For many larger entities, these options may not be practical within the timeframes required. We are therefore of the view that the Government should reinstate temporary legislation as it did during last year’s lockdown. This would provide some much-needed certainty to entities looking to comply with their legal obligations.
Duncan Cotterill has approached the relevant government ministers to express this opinion and awaits a response.
For further information or advice, please contact a member of our corporate and commercial team.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.