Ian Ramsay wants a corporate law-reform body and a reappraisal of how AGMs are conducted

University of Melbourne emeritus professor Ian Ramsay says the government should consider reviving CAMAC, which was a source of recommendations for law reform for 25 years.

Rio Tinto’s “virtual” annual shareholder meeting can be watched from mobile devices.

Corporate law expert Ian Ramsay wants the federal government to review regulations around hybrid annual meetings and shareholder resolutions in areas such as ESG to reflect technological and social changes.

Mr Ramsay, an emeritus professor of law at the University of Melbourne who was awarded an AO on Australia Day, said these were two areas which should be considered by a new national corporate law-reform advisory body.

Mr Ramsay said the government should consider reviving the Corporations and Markets Advisory Committee (CAMAC), which was a source of recommendations for law reform for 25 years until its abolition in 2018 by the previous government.

There needed to be a review of the legislation around annual meetings in the wake of the Covid-19 moves towards having more meetings online.

“Covid meant that there had to be a shift to online meetings,” he said.

“That was fair enough, but there was growing evidence that fully online meetings had some disadvantages compared to face-to-face meetings.

“The best solution is a hybrid meeting where there is both face-to-face and online participation.”

Melbourne University emeritus professor of law Ian Ramsay.

He said there was evidence that some online meetings were shorter than face-to-face meetings and the boards didn’t fully answer shareholder questions.

This was a key issue which could be considered by the re-­establishment of an independent corporate law body which could review the impact of the changes in the way companies operated, including technological changes.

“AGMs have an important purpose,” he said. “How should you best undertake AGMs and EGMs in a world where you need to facilitate online participation as well as face-to-face participation? What is best practice? How can you facilitate it?

“We need to consult with companies, shareholders and directors to get evidence on what has happened and what would be good practice.”

Mr Ramsay said there also needed to be a reassessment of the regulations around shareholder proposals to annual meetings in the wake of the growing move to have ESG resolutions debated at annual meetings. The current situation where there had to be a change in the constitution of a company for the AGM to consider an ESG related issue was “messy” and did not reflect a changing social view that AGMs should be allowed to consider a broader range of issues than those related to company profitability.

“The process for getting shareholder resolutions on the agenda is extremely cumbersome,” he said. “These resolutions (on ESG issues) are growing in number and having a bigger impact on companies. Companies are no longer ignoring them or knocking them back.

“But, in the past, courts have said these are a matter ­for ­management, so shareholders shouldn’t have a say. We need to make it easier or have a more efficient system for shareholders to put up resolutions.

“You want to allow appropriate shareholder resolutions, but you don’t want to have companies overburdened by irrelevant ones which might just be a single shareholder pushing their own barrow.”

Mr Ramsay said corporate law needed to be regularly reviewed to take into account changes in technology, which are now allowing for a much broader interaction between companies and their shareholders. “Technology needs to be continually reviewed, monitored and assessed.”

Mr Ramsay said the former CAMAC had made many recommendations which were implemented by government, including changes to the law to facilitate crowdsourced equity funding in a report published in 2014.

Mr Ramsay said should be a reassessment of the regulations around shareholder proposals to annual meetings.

CAMAC had also pushed for greater gender diversity on boards, made recommendations which led to the requirement for continuous disclosure of material events by listed companies, stricter insider trading legislation, rules around blackout periods for share trading by directors and executives, more disclosure by directors and issues around the regulation of takeovers, derivatives, and the voluntary administration process.

Mr Ramsay said there needed to be a permanent body which reviewed corporate law and was independent of any vested interest and had a proper process, including allowing enough time for consultation about proposed changes.

He said the abolition of CAMAC “weakened the corporate law reform process. It was a major disappointment for those who have a strong interest in efficient and effective corporate law reform in Australia.”

There was now no independent body available to review proposed changes to corporate law and to make sure interests from different states were taken into account. Mr Ramsay said companies also wanted to operate in a world where the corporate legislation was modern and up to date.

“It allows for certainty and allows them to make good faith investment decisions,” he said. “They intensely dislike laws which are out of date or which impede their decision making or create uncertainty.”

Mr Ramsay, who has been actively involved in reviewing Australian corporate law since the 1980s, and has just written a new book on principles and governance for company directors, said he had seen a significant increase in standards of corporate governance in Australia over the period.

This had been facilitated by changes including the introduction of the ASX’s corporate governance principles which were in their fourth iteration and the introduction of higher penalties for breaches of directors’ duties.

“In the more than 30 years since I have been involved in this area, it has been a very welcome development to see the enhancement of the standards of corporate governance in Australia,” Mr Ramsay said.