Corporate Advisory Bulletin – March/April 2021

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In the media

ASIC to adopt ‘no-action’ position for AGMs

ASIC will shortly adopt a temporary ‘no action’ position in relation to the convening and holding of virtual meetings.

This means that online-only shareholder meetings will be condoned by the corporate regulator, even though the rules allowing them, in the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Determination No. 3), lapsed on 21 March 2021.

To read more, click here.

In Practice and Courts

Changes to director resignations

As part of the effort to combat illegal phoenix activity, changes to director resignations implemented under the Treasury Amendment (Combatting Illegal Phoenixing) Act 2020 (Cth) have taken effect from 18 February 2021.

ASIC must now be notified within 28 days of a director resignation. Where ASIC is not notified within this timeframe, the effective resignation date will be the lodgement date. Late fees will apply and to fix the resignation date, applications must be made to ASIC or the court.

Unless a company is being wound up, directors are now prevented from resigning in circumstances where they are the last remaining director on ASIC records, leaving a company with no directors.

COVID-19 temporary measures set to become permanent features of the justice system in Victoria; Federal bill does not pass

The Justice Legislation Amendment (System Enhancements and Other Matters) Bill 2021 has passed through both houses of the Victorian Parliament and is set to make permanent a range of temporary measures introduced in response to COVID-19 in Victoria.

Among other things, the Bill allows for:

  • deed and mortgages to be signed electronically;
  • split execution; and
  • remote witnessing or making of instruments such as powers of attorney, affidavits, statutory declarations and the like.

The relevant provisions come into effect on 26 April 2021 and are set to modernise how Victorians access justice.

For the full media release, click here.

However, in Australia, section 127 of the Act is to be read without the benefit of the temporary rules after the Federal Government failed to pass the bill which provided that documents under section 127 of the Corporations Act 2001 (Cth) could be executed by electronic means, and with ‘split execution’. This Determination expired on 21 March 2021.

This means the pre-COVID position for execution under section 127 applies; specifically, documents must be signed in wet-ink and at the same time. The Senate has adjourned debate on the bill until August 2021.

Case Law and Focus Point

Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCA 172

The Federal Court has ordered that Freedom Foods Pty Ltd (Freedom Foods), must head to arbitration in California to settle is legal dispute with key supplier Blue Diamond Growers (Blue Diamond).

Freedom Foods entered into a Licence Agreement with the Californian incorporated company Blue Diamond in October 2011 under which Freedom Foods were licensed to manufacture and sell almond milk products under the ‘Almond Breeze’ name and associated trade marks.

Blue Diamond lodged a demand for arbitration against Freedom Foods with the American Arbitration Association’s International Centre for Dispute Resolution on 25 September 2020. They alleged that Freedom Foods had breached the exclusivity provisions under the Licence Agreement by manufacturing, selling and distributing nut-based beverage products other than Blue Diamond’s products.

Freedom Foods commenced the proceeding in question on 29 September 2020 alleging misleading and deceptive conduct by Blue Diamond, specifically that Blue Diamond had not acted in good faith under the Franchising Code of Conduct (Code), and that the Licence Agreement constituted a Franchise Agreement. They also alleged that Blue Diamond had engaged in unconscionable conduct in breach of the Australian Consumer Law.

The Court ordered Blue Diamond to accept that Australian law is to be applied by the arbitrator in determining Freedom Food’s claims, and to discontinue proceedings brought separately against Freedom Foods in California.

For the full judgement, click here.

Shareholder Oppression

Shareholder oppression involves conduct by majority shareholder(s) which is unfairly prejudicial to the interest of the minority. It is important that majority shareholders ensure that the company acts in the best interests of all shareholders at all times, not just the best interests of the majority.

Minority shareholders should be aware of their rights, but keep in mind that a disagreement with majority shareholders does not automatically amount to oppression.

You can read more about shareholder oppression in our fact sheet which can be accessed here.

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