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Chapter 13 - Receipt of Proxy Appointments
Whether listed companies must specify a place, fax number and electronic
address for the purpose of receiving proxy appointments
13.1
Section 250BA of the Corporations Law provides
that, in a notice for a meeting of members, a listed company must specify a
place and a fax number and may specify an electronic address for the purpose of
receiving proxy appointments.
13.2
Submissions to the PJSC commented on the manner
of transmission of proxy appointments and the validity of proxy appointments
sent by facsimile and electronic mail.
Arguments in favour of provision of facsimile address for receiving proxy
appointments
Matters requiring clarification
13.3
Generally submissions were supportive of the
requirement for companies to specify a facsimile address for proxy
appointments. For example, GIO Australia Holdings Ltd (GIO) submitted that the
provision of facsimile addresses was either in the interests of shareholders or
efficient corporate governance.[1]
13.4
The new provision also reflects current
developments and will assist the global marketplace by encouraging foreign
investors “to participate in a faster fashion than that available by mail.”[2] Corporate Governance
International Pty Ltd noted that:
...even the smallest listed company should not have any practical
difficulty or material cost in providing its public shareholders with a
mutually convenient fax number for receipt of proxies....such a fax facility
extends for public shareholders both the practical time for, and the
convenience of, lodging their proxy votes and therefore, should encourage
public shareholders to register their proxy votes, and especially institutional
investors.[3]
13.5
However, several companies and professional
bodies drew the attention of the PJSC to a number of issues that should be
resolved.[4]
For the requirement to be effective, it was submitted that:
- The proxy should be sent to the facsimile number specified in the
notice of meeting;
- A company should be entitled to rely on the fact that a proxy
transmitted by facsimile is signed correctly without the need for
authentication; and
- The consequences should be clarified as to the situation where a
proxy, which is transmitted by facsimile, has been improperly prepared and the
proxy is counted in good faith and alters the result of the meeting.[5]
13.6
The Australian Law Reform Commission (ALRC) also
cautioned that the manner of transmission may promote the fraudulent abuse of
proxies:
The extent to which such methods can lend themselves to fraud
needs, however, to be considered and, if necessary, taken into account in the
legislation.[6]
13.7
In relation to the issue of the authentication
of signatures on proxies, Mr John Wilkin advised the PJSC that the
authentication of a signature on a facsimile is much the same as for a letter.[7]
Companies should specify only one
place and facsimile address
13.8
Support for a facsimile address in the notice of
meeting was qualified by the assertion that companies should submit only one
place and one facsimile address to avoid confusion. Arnold Bloch Leibler stated
that the rationale for this is that proxy appointments do not have to be dated.
If a member executes more than one proxy difficulties may arise in determining
which proxy was received last as they can be “delivered in too many different
ways to a company.”[8]
Mr Nick Renton told the PJSC:
Clearly, there must be certainty as to what constitutes a valid
proxy. Stipulation as to the acceptable places of lodgment is therefore
essential.[9]
Arguments in favour of the provision of an electronic address for receiving
proxy appointments
13.9
At present the Law does not require listed
companies to specify an e-mail address for the transmission of proxies. This is
only an option. A number of submissions expressed support for the proposal that
companies should provide an electronic address for receiving proxy
appointments.[10]
Modern day technology
13.10
The ALRC expressed the view that the requirement
addresses the realities of modern day communications:
The requirement to have a fax machine and an electronic address
facility cannot be regarded as an imposition on a listed company.[11]
13.11
The PJSC was told that casting votes
electronically should be encouraged on the grounds of efficiency.[12] To illustrate these
efficiencies Mr Renton described the method of electronic voting by US
companies where each shareholder is provided with a unique “control number” or
PIN which accompanies the notice of meeting. On accessing a specified web site,
the shareholder is given a choice of voting for the directors’ recommendations
or voting on each question separately:
The former is the equivalent of sending in a blank proxy in
favour of the chairman of the meeting, while the latter allows “for”, “against”
or “abstain” decisions as the voter sees fit...If desired, an e-mail response
from the returning officer can be obtained immediately, acknowledging that the
vote has been duly received and processed. This highly efficient use of the new
technology is very quick, convenient and cheap for all concerned.[13]
13.12
The Investment & Financial Services
Association Ltd (IFSA) supported the use of electronic mail because it will
enable shareholders to lodge votes faster. IFSA noted that:
... the use of electronic communication can only increase as time
goes on. To rely on outmoded methods of voting can only lead to Australia
lagging behind the rest of the world.[14]
13.13
Computershare Registry Services told the PJSC
that many companies are keen to embrace the new technology and in particular
electronic proxy voting but are unable to do so because of the impediment of
the Law. Mr David Cantrick-Brooks, Manager, Computershare Registry Services
summarised the provisions relating to electronic proxy appointments:
The Corporations Law currently
envisages electronic proxy voting in section 249J(3) where notice may be given
by sending it to an electronic address, by section 250B(3) where proxy
documents may be received at an electronic address specified for the purpose in
the notice of meeting, and section 250BA where listed companies may specify an
electronic address...
Many of our larger clients are keen to embrace electronic proxy
voting but feel constrained...there appears at the moment to be a door open for
you to use proxy voting. For example there is a reference to sending out a
notice of meeting, using an electronic address and receiving back a proxy form
on an electronic address. But the missing link is the requirement in section
250A for the document to be signed. That is a bit of a sticking point because
you cannot actually sign it unless it is a digital signature or you have
somehow or other taken it off the print-out, scanned it - and back again.[15]
Arguments against the provision of electronic address for proxy
appointments
Ascertaining whether proxy form
duly executed
13.14
The Henry Walker Group Ltd advised the PJSC that
there might be difficulty in ascertaining whether a proxy appointment has been
properly executed. It suggested that consideration should be given to the
circumstances in which a company can assume a proxy form has been properly
executed when received electronically.[16]
13.15
The PJSC was also advised that whereas
authentication of a signature on a facsimile transmission is similar to that
for letters, this is not the case in regard to electronically transmitted
documents. Mr John Wilkin submitted that electronic mail has other
authentication problems and should not be allowed.[17] The Law Institute of Victoria
cautioned the PJSC that the issues relating to electronic signatures should be
resolved before provisions relating to electronic mail are introduced.[18]
13.16
Similarly the Accounting Bodies recommended to
the PJSC that guidelines be developed to ensure that companies have adequate
arrangements in place to deal with any breakdown in transmission of proxy
appointments and the security of those communications.[19]
13.17
Coles Myer Ltd pointed out that before electronic
transmission can be implemented the Law must incorporate a new definition of
what is ‘signed’ for electronic purposes.[20]
It was noted that the problem arises from section 250A of the Law which
requires the proxy appointment to be signed. Coles Myer suggested that a
definition could be included in Section 9-Dictionary, which defines signing for
electronic purposes “to be the input of a PIN, digital signature or such other
method as the parties agree”.[21]
Some companies not prepared for
electronic proxy appointments
13.18
It was argued that a large number of listed
companies are not yet equipped to comply with a requirement to provide an
electronic address for proxy appointments. For example, the Henry Walker Group
Ltd does not have an Internet proxy form and currently has no plans to develop
one. The Australian Stock Exchange along with other submissions argued that an
electronic address should remain optional.[22]
13.19
The Association of Mining and Exploration Inc
(AMEC) told the PJSC that many smaller companies do not have an e-mail
facility. AMEC recommended maintaining the current situation where companies
provide a place and facsimile address, and if desired an electronic address for
proxy appointments.[23]
Potential fraudulent abuse
13.20
As noted earlier, the ALRC warned that the
legislation should address the extent to which electronic mail and facsimile
transmissions can be used to advance fraudulent purposes.[24] Similarly it was recommended
that in light of the potential for abuse consideration should be given to absolving
a company and its registry from liability where a proxy accepted in good faith
is later shown to be fraudulent.[25]
Other matters
Appointment of proxies
13.21
Section 249X(1) of the Law provides that a
member of a company may appoint a “person” as the member’s proxy to attend and
vote for the member at the meeting. The Australian Shareholders’ Association
Ltd (ASA) told the PJSC that from time to time shareholders appoint the ASA as
their proxy on the understanding that it will then appoint an individual as its
representative to attend the meeting. While some listed companies accept
proxies in this form, the ASA submitted that “others and their legal advisers
and auditors take the view that the word ‘person’ in subsection in 249X(1) is
restricted to a natural person, ie an individual.”[26]
Conclusions
13.22
The PJSC believes that it is a matter of
prudence and good corporate governance for companies to facilitate the receipt
of proxy appointments. Most listed companies already retain the services of a
professional share registry to receive proxies by facsimile and as the ALRC
noted the requirement for a facsimile address is not a large imposition on a
listed company. The benefit of this facility for shareholders was not in
question. However, certain practical issues were drawn to the attention of the
PJSC which included the authentication of proxies and security of electronic
communications. The PJSC concludes that section 250BA should be retained and
the following requirements should be included in the section to authenticate
proxy appointments and avoid confusion:
- For a facsimile transmission of a proxy to be executed, the proxy
should be a complete reproduction of the entire original writing or
transmission;
- For proxy appointments executed by corporate or institutional investors,
proxy appointments must be witnessed or executed by an officer of the court. In
the case of foreign investors it must be executed by an attorney;
- The notice of meeting must specify only one place and facsimile
address.
13.23
In its 1998 Report on the Company Law Review
Bill 1997 the PJSC supported changes to the Law facilitating the use of
electronic communication between companies, their shareholders and the
regulatory bodies. It concluded that:
The Bill does not impose, nor should it, an obligation to use
electronic forms of communication but rather facilitates its greater use to
improve the flow of information in the market.[27]
13.24
The PJSC has not changed its view on this matter
and recommends that the requirement should remain optional for listed companies.
Several companies, shareholder groups and share registry services favoured the
use of electronic communication and receipt of proxy appointments
electronically. However, the two major concerns were security of communications
and the impediment of the Law. The PJSC believes that companies should be able
to transmit electronically any document which the Corporations Law requires
they send to members provided that the individual shareholder or institution
has agreed. To facilitate the receipt of proxy appointments, the PJSC concludes
that a new definition of “sign” should be inserted in Section 9-Dictionary,
that defines signing for electronic purposes to be the input of a ‘PIN’.
13.25
To formalise the practice of some listed
companies in accepting proxies appointing the Australian Shareholders’
Association, the PJSC concludes that the words “including a body corporate”
should be inserted after the word “person” in section 249X(1).
Recommendation
13.26
The PJSC recommends that the Corporations Law:
- should retain section 250BA subject to the
amendments described above to authenticate proxy appointments;
- should include a new definition of “sign” in
Section 9 – Dictionary, to define sign for electronic purposes to be the input
of a “PIN”;
- should include in section 249X(1) provision for
a body corporate as well as a natural person to be appointed as a proxy.
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