This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this Edition, we consider the 2020-2021 Federal budget, the Takeovers Panel’s reasons for its Alto Metals Limited decision, the Treasury’s consultation on insolvency reforms and the new alternative JobKeeper test.
YOUR KEY BOARDROOM BRIEF
2020 – 2021 Federal budget. On Tuesday 6 October, Treasurer Josh Frydenberg released the highly anticipated 2020 – 2021 Federal budget. The budget committed a further $98 billion to securing Australia’s economic recovery including $25 billion in direct COVID-19 response measures and $74 billion in new measures to create jobs. Businesses and individuals will be granted almost $50 billion in tax relief, however, there were no substantive tax reform measures introduced. Notably, the budget amends the corporate residency test to clarify that having “central management and control” in Australia will not result in the company carrying on core commercial activities in Australia for the purposes of determining corporate tax residency. Additionally, businesses with an aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 where those assets are first used or installed by 30 June 2022. See Treasury’s media release and the 2021 – 2021 budget website.
Takeovers Panel releases reasons for Alto Metals decision. In making a declaration of unacceptable circumstances in Alto Metals Limited  ATP 17, the Panel considered that the recommendation made by Alto Metals that its shareholders should reject Habrok (Alto) Pty Ltd’s (Habrok) takeover bid was misleading or had the potential to mislead shareholders. The Panel further considered that this recommendation, in combination with the announcement of an entitlement offer (which Habrok alleged frustrated its takeover bid), had an effect that might have contributed to a proposed acquisition by Habrok not proceeding, and were contrary to an efficient, competitive and informed market. The Panel reached this view in light of consideration of Board minutes with respect to the recommendation, takeover bid and entitlement offer. The Panel suggested that the lack of deliberation around the takeover recommendation was “curious” given the significance of the decision for shareholders. The Panel’s reasons serve as a reminder that Directors of companies subject to takeover action (or likely takeover action) should ensure that their deliberations are properly recorded in board minutes. See the reasons for decision.
Treasury consults on insolvency reforms to support small businesses. The Treasury has initiated public consultation on the exposure draft legislation and explanatory material for the changes to Australia’s insolvency framework made on 24 September 2020. These changes aim to help more small businesses restructure and survive the economic impact of COVID-19 through a US-style insolvency framework. Key aspects of this new framework include a new formal debt restructuring process for small business and moving from a rigid one-size-fits all “creditor in possession” model to a more flexible “debtor in possession” model. Public consultation on these changes is now open until 12 October 2020, with the changes due to commence on 1 January 2021, subject to the passage of legislation. See the Treasury’s consultation page.
Alternative JobKeeper tests registered. On 9 October 2020, the Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Amendment Rules 2020 were registered, and will commence on 10 October 2020. These amendment rules introduce an alternative “decline in turnover” test where companies do not have an appropriate comparison period in 2019 .
ON THE HORIZON
President Trump. As previously observed, equity markets have responded positively to President Trump’s COVID-19 recovery – and the past week has been no different, with the S&P/ASX 200 Index experiencing its best week since April. However, the recent push (and likely the push in weeks to come) is becoming less about President Trump’s recovery from COVID-19 and more about the fast-approaching US election and its broader impacts for the US and global economies. While many speculate about the long-term impacts on the equity markets as a result of the US election outcome, we can expect to see some volatility in the short term as the countdown to the election continues. Betting markets have recently swung strongly towards a Biden Presidency come November.
Diggers & Dealers. This week marks the return of the delayed Diggers & Dealers conference in Kalgoorlie, likely to be one of the largest mining conventions in the world for the foreseeable future. The gold M&A thematic is likely to dominate proceedings on the back of the announced A$16bn merger between Northern Star and Saracen, with speculation likely to turn to consolidation opportunities at the small to mid-cap end of the market.