Insights

15/07/19

Boardroom Brief: Week commencing 15 July 2019

Welcome to Edition 118 of Boardroom Brief.

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 cover: (i) ASIC’s first proposed use of its product intervention power; (ii) new laws to combat phoenixing; (iii) taxation reform; and (iv) ASIC’s proposed restrictions on the use of ‘stub-equity’ in control transactions.

YOUR KEY BOARDROOM BRIEF

ASIC consults on proposal to stop consumer harm in short term credit. ASIC has released a consultation paper on the first proposed use of its product intervention power; an important addition to ASIC’s regulatory toolkit, introduced earlier this month. ASIC is wielding for the first time its power to issue an order temporarily shutting down a loophole allowing lenders and associates to charge fees that equate to effective interest rates as high as 990% of the loan amount. Submissions can be made until 30 July 2019 (see ASIC’s media release). Directors are also reminded that comments close on 7 August 2019 for ASIC’s draft guidance on the use of its new power. ASIC’s drive to restore public confidence in its ability to do its job was also underlined last week by the publication of its review findings on unacceptable insurance sales practices by 11 major banks and proposals for new regulations in that space.

Parliament considers new pheonixing offences. As part of the Government’s agenda to clamp down on ‘phoenixing’ — being when a new company is created to continue the business of another company that has been deliberately liquidated to avoid paying debts to creditors — a new Bill to amend corporate and taxation law has undergone its first reading in Parliament. The Bill seeks to introduce new phoenixing offences and improve the accountability of directors (for example, by preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors and empowering the Commissioner of Taxation to take certain actions in relation to misconduct by directors). See the explanatory memorandum for more information.

THE WEEK AHEAD

Taxation reform. Following the Government’s recent Parliamentary victory after the passage of its $158 billion income tax cut package, millions of Australians who lodge a tax return this year are likely to receive a welcomed bump to their refunds, or a reduction in what they owe. Policy makers will be closely monitoring economic indicators for signs that the stimulus is having the desired effect on consumer sentiment and wage growth, which the RBA has indicated are key to the trajectory for interests rates this year.

ASIC’s consultation on ‘stub-equity’ in control transactions closes this Wednesday. ASIC’s proposed restrictions (see our earlier Boardroom Brief for more detail) are intended to address a concern that certain stub equity structures run counter to the underlying policy of the provisions governing proprietary companies (ie, their shares are generally required to be closely held and they are subject to lower disclosure and governance requirements than public companies) and deny retail investors important protections.