The Government has reintroduced COVID-19 response legislation to temporarily ease administrative burdens on private entities. This includes changes to temporarily enable electronic handling of matters like meeting and voting, and modify entity processes, as we cover here.
This article provides practical guidance on how you can use the legislation to address your obligations as an officer of an entity by deferring AGMs, extending terms of office, and conducting meetings and voting electronically.
Q: I’m an officer of an entity, such as a charitable trust or Māori land trust, and we want to postpone our AGM and elections beyond when our term of office would expire. What do we do?
A: To do this, you will be relying on section 13A of the COVID-19 Response (Requirements for Entities—Modifications and Exemptions) Act 2020, which allows you to modify requirements or restrictions in your trust’s constitution or rules, including matters relating to calling or holding meetings.
You must reasonably believe it is necessary to postpone the AGM
First, you and a majority of the trust’s officers need to carefully consider whether, because of the outbreak of COVID-19, it is not, or is not likely to be, reasonably practical to hold the AGM, and whether postponing the AGM and elections goes no further than is, or is likely to be, reasonably necessary in the circumstances. It is important you get this right, because you will need to record your reasons for this in writing, and send it to the relevant registrar. (For a charitable trust, this is the Registrar of Incorporated Societies. For a Māori land trust, this is the Chief Registrar of the Māori Land Court.)
For those of you with substantial membership in Tamaki Makaurau at time of writing, the restrictions of Alert Level 3 Step 1 are more than enough to pass this threshold. For those in level 2 areas, this decision becomes harder, as Aotearoa is unlikely to return to Level 1 in the foreseeable future.
You will need to consider whether it is more practical to hold an AGM under the current alert level system, or whether it would be more practical to wait for the traffic light system. Considerations in favour of waiting include an increased vaccination rate, a lower likelihood of disruptions due to a shift to the traffic light system, and the current impact of holding an AGM on members overseas or in Alert Level 3 regions.
One factor to turn your mind to is that, at present, there is a negligible risk from community transmission of COVID- in Alert Level 2 regions, but it will be under the traffic light system for the foreseeable future. You will need good reason to justify moving your AGM from a period with next to no COVID-19 community transmission to a period where there is expected to be more community transmission.
You will also have to address the question of whether conducting an AGM and voting electronically is a less extreme approach than postponing the AGM, as you can only postpone if doing so goes no further than is reasonably necessary. This is not necessarily an insurmountable hurdle. Your circumstances might be that postponement would be less extreme than a shift to an electronic meeting. This may be the case if significant segments of your membership are likely to struggle with electronic meeting or voting.
You must also consider whether the postponement would be oppressive, unfairly discriminatory, or unfairly prejudicial to any member, creditor, or other person. This will depend on your entity’s circumstances, what it plans to do over the coming year, and whether there is significant disagreement within the membership that an AGM or election would ordinarily address.
What to include in the notice of modification
Once you and a majority of officers have decided that postponing the AGM is necessary, you will need to draft a notice modifying your constitution or rules. A majority of you will need to sign this notice.
Helpfully, the legislation allows for this to be done electronically. This means you can hold your meeting over video software like Zoom, Skype, FaceTime, or Microsoft Teams, agree on the terms, then circulate the draft notice for signing via email.
Your notice should make the minimal degree of change necessary to achieve your goal of postponing the AGM and elections. We advise you to seek legal advice on the exact form of this notice, as it will differ depending on the contents of your constitution. We would be more than happy to assist you with this matter.
For the sake of example, a notice of modification may resemble the following:
- Notwithstanding any other obligations under these rules/this constitution, no officer shall be required to call an AGM of this entity or election of the officers of the entity between 3 November 2021 and 30 April 2022 (“COVID-19 Period”).
- No currently sitting officer shall be restricted from performing any of the usual functions of their office due to the absence of an AGM during the COVID-19 Period.
- No currently sitting officer shall be required to surrender their office due to expiry of a term of election within the COVID-19 Period, unless an election for their office is held within the COVID-19 Period.
- No currently sitting officer shall be restricted from performing any of the usual functions of their office due to expiry of a term of election within the COVID-19 Period, unless an election is held within the COVID-19 Period.
If the Governor-General issues an Order in Council under s 42A of the COVID-19 Response (Requirements for Entities—Modifications and Exemptions) Act 2020 extending the application of s 13A of the same, the COVID-19 Period referred to in this notice shall be similarly extended.
Keep in mind that these modifications to your rules/constitution expires after either 30 April 2022, or if the Governor-General issues an extension, 30 October 2022. While the sample modification removes all obligation to hold an AGM and shields you from the consequences for failing to do so, it ceases to have effect at the end of the period. If you haven’t arranged an AGM by then, you will be acting ultra vires.
You must notify the registrar and members and keep records
Once you have drafted and signed your notice of modification postponing the AGM and elections, the change is made. After that, you need to notify all members and governing officers of the change.
You will need to keep a written record of the notice of modification, and your reasons for believing this is reasonably necessary and not prejudicial to any other person, as discussed above. You will then need to send these, alongside a certificate by a governing officer certifying that all requirements of the Act were complied with, to your relevant registrar. (For example, charitable trusts to the Registrar of Incorporated Societies, and Māori land trusts to the Chief Registrar of the Māori Land Court.) The Act does not prescribe a particular form for this certificate.
Q: I’m a governing officer of a Māori land trusts or incorporation –Can the Māori Land Court help us?
A: If you are a Māori land trust or incorporation, you have an alternative approach of applying to the Māori Land Court for relief from any term of your trust, order incorporating a Māori incorporation, or the terms of a trust relating to a Māori reservation.
As this is approach requires going through the court, we advise you seek legal representation for doing so.
The benefit of this approach over using the s 13A modification is that it explicitly seeks the court’s approval. If the extension is granted, you can be assured that you will be immune from legal challenge. If you have reason to suspect that postponing elections and an AGM might prove controversial, it would be worth discussing with your lawyer whether a pre-emptive application to the court would be worthwhile.
Q: I’m the governing officer of an entity, and we want to hold our AGM and vote electronically—what do we do?
A: Even if your constitution explicitly requires an AGM and voting to be done in person, s 10A of the Act allows you to conduct it electronically. If your constitution already allows you to meet and vote electronically, you’re already sorted—this section isn’t for you.
You must reasonably believe it is necessary to hold the AGM electronically
First, you and a majority of the trust’s officers need to carefully consider whether, because of the outbreak of COVID-19, it is not, or is not likely to be, reasonably practical to hold the AGM in person. It is important you get this right, because you will need to record your reasons for this in writing, and send it to the relevant registrar. (For a charitable trust, this is the Registrar of Incorporated Societies. For a Māori land trust, this is the Chief Registrar of the Māori Land Court.)
For those of you with membership in Tamaki Makaurau at time of writing, the restrictions of Alert Level 3 Step 1 are more than enough to pass this threshold. For those in level 2 areas, this will depend more on your entity’s circumstances. If any of your membership or governing officers are in a level 3 area or overseas, that will be sufficient justification, as they would otherwise be unable to attend. If you have a large number of members, such that a meeting would risk breaching COVID-19 regulations, that too will be good reason for using electronic means. Alternatively, if all your members meet for other purposes, but you still opt to use this provision, you may encounter difficulties.
Our view is that the courts are likely to take a public health approach to the question of what is ‘reasonable practicable’. While it might ordinarily be practical for members to travel from all across the country, the courts will be sympathetic to the risk of COVID-19 transmission. In the circumstances of a pandemic, it is unlikely to be ‘reasonably practicable’ to require members to travel and meet face to face.
You must reasonably believe that electronic voting will not compromise the voting process
If you want to conduct voting electronically, you will need to reasonably believe that doing so will not substantively compromise the integrity of the voting process, and that any provisions relating to voting for your entity will be substantively complied with. Again, you will need to record your reasons for this and send it to the relevant registrar.
For this, you will need to demonstrate an understanding of the electronic voting process being used. Prior experience with the process will be helpful. You may find it helpful to use an experienced third-party provider of voting software.
You, and a majority of the governing officers, will need to sign a certificate certifying as to your belief of the integrity of the voting process, and the reasons why. You must then keep that certificate with the entity’s records.
You must notify the registrar and members and keep records
Prior to holding your AGM and conducting voting via electronic means, you must make reasonable efforts to notify all members and governing officers that you will be doing so. When notifying members, you can rely on previous email addresses members have supplied to you, provided a member has not explicitly requested that you use another method of communication instead.
You also have to send your relevant registrar a written notice explaining that you intend to conduct an AGM and voting by electronic means, accompanied by the reasons for doing it by electronic means. While the Act doesn’t explicitly say you have to send the certificate of the integrity of the voting process, our view is that including it in the email for completeness doesn’t hurt.
While the Act does technically allow for the notifications to members and the registrar to be done “as soon as reasonably practical after the matter is done”, our strong recommendation is that you inform members that you will be doing an electronic AGM and voting before actually doing so.
For more information
Morrison Kent is available to assist you remotely with tailored advice for any of the matters discussed here. Please call 04 472 0020 for advice or to arrange a virtual consultation.