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09.11.2022

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Contested investor meetings and valid proxies

Trustees and responsible entities (REs) should be diligent when examining the validity of proxies received prior to investor meetings, particularly contested investor meetings.  In this article, lawyer Sarah Sherman explains what you need to know.


Key points

  1. While the requirements for proxy votes under the Corporations Act (Act) appear relatively straightforward, care must be taken to ensure there is strict compliance.  
  2. Resolutions influenced by invalid proxies may also be invalid, calling into question any acts performed in reliance on them. 
  3. Trustees and REs should carefully examine any proxies received ahead of investor meetings and seek prompt advice if concerned about their status.

Contentious investor meetings

Investor meetings (whether between unit holders in a trust, registered scheme, or otherwise) are an important governance tool. However, they can also be a vehicle for disgruntled investors to influence the affairs of the trust or scheme in a way which furthers their own interests. Examples include seeking resolutions for—

  • removal of the trustee or RE
  • amendments to the constitution of the trust or scheme, or
  • sale of property belonging to the trust or scheme.

Where there are competing interests at play, it is all the more important to ensure there are no irregularities in meeting procedure or voting which may compromise the validity of any resolutions. 


Proxies

The Act sets out the procedure for investors to appoint a proxy to vote on their behalf at investor meetings, which is often supplemented by the relevant constitution.  

Trustees and REs should always examine proxies received prior to an investor meeting to ensure they are valid. In the case of contentious meetings, proxy votes are particularly important because they are vulnerable to suggestions of manipulation by parties looking to further their own interest.

What are the key matters for trustees and REs to consider in determining validity of proxies?


Execution

A common issue with proxy documents is whether they have been validly signed or executed. Signatories should always match the records held by the trustee or RE. In the case of companies, it is best practice to undertake a current ASIC search to confirm the number and identity of directors.  For companies with multiple directors, two directors are required to sign the proxy form. If only one director proposes to sign the proxy, it will need to provide evidence of its authority to do so (for example, by way of the company constitution or a power of attorney).  If only one director signs the proxy, but does not state they are sole director, this could be a warning the proxy form is invalid.


Delivery 

Proxy documents must be provided to the trustee or RE in advance of the meeting.  It is best practice for an investor to send the proxy directly to the trustee or RE. This protects the integrity of the proxy and eliminates the possibility of interference.

In the case of contentious meetings, it is common for disgruntled investors to attempt to persuade other investors to direct proxies to a common person.  Investors may be told to provide proxies to the appointed person or a third party, who will in turn pass them on to the RE or trustee. This leaves the proxies vulnerable to tampering or manipulation and hinders the RE or trustee from assessing their validity in advance of the meeting.

Any notice of meeting which specifically directs proxies to be sent other than to the RE or trustee (or their professional advisers), without giving the option of sending them directly, will likely be invalid.


Timing and receipt

Depending on the trust or scheme’s constitution, proxy documents are typically required to be received by the trustee or RE at least 48 hours before the meeting. The documents may be received
at a trustee or RE’s—

  • registered address
  • fax number
  • a place, fax number, or email address specified in the notice of meeting.

The term ‘received’ in relation to an email communication is defined in the Act as when the email ‘becomes capable of being retrieved by the addressee at the addressee’s nominated electronic address’. Examples of when a proxy will not have been received by email include where—

  • an email bounces back due to an incorrect email address
  • the trustee or RE’s server rejects the email based on the size of the attachments. 

If the proxy is not received in the timeframe specified in the Act or the constitution, the proxy is invalid. The chairperson of the meeting does not have a discretion to accept the proxy.


Reach out 

Reach out to us if you have questions about the validity of proxies received prior to investor meetings, particularly contested investor meetings.


Authors

Sarah Sherman

Sarah Sherman

Lawyer

Contact McMahon Clarke

Brisbane
T +61 7 3239 2900
A Level 7, 100 Creek Street, Brisbane Qld 4000

Melbourne
T +61 3 9909 1400
A Level 2, 696 Bourke Street, Melbourne Vic 3000