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 Court case which introduces a difficult situation for directors considering deficient shareholder meeting requisition notices, further proposed changes to Australia’s insolvency framework, the new JobMaker Hiring Credit and ASIC’s further extension to upcoming financial reporting deadlines. We also consider the rise of the Government and regulators’ responses to the Hayne Royal Commission and what this will mean for the traditional financial services industry and beyond.
YOUR KEY BOARDROOM BRIEF
Deficiencies in section 249D shareholder requisition notices put directors in difficult position. The recent Victorian Supreme Court ruling in Vaspip 2 Pty Ltd v Thorn Group Ltd  VSC 700 has left directors in a difficult position with respect to responding to invalid shareholder meeting requisition notices under section 249D of the Corporations Act. Thorn Group identified invalidity of a shareholders’ requisition notice and subsequently declined to convene the meeting. However, the requisitioning shareholders successfully obtained orders validating the deficiencies in the notice on the basis those deficiencies were a mere procedural irregularity. Therefore, the Court ordered that the meeting be convened and – to rub salt in the wound - Thorn Group pay the requisitioning shareholders’ costs of the application. This decision leaves directors in a tricky position when faced with a deficient shareholder meeting requisition notice. On one hand, the directors may choose to convene the shareholder meeting, resulting in the entity incurring costs of a meeting which was never validly requisitioned. On the other, the directors can (seemingly justifiably) choose to decline to convene the shareholder meeting, to later find the deficiency could be cured, the meeting is required to be convened and the company is liable to pay shareholders’ costs in pursuing these orders. Directors should carefully consider each of these options, and the consequences of each option in light of this decision.
Corporate Insolvency Reforms Bill introduced into the House of Representatives. The Corporations Amendment (Corporate Insolvency Reforms) Bill 2020 has been introduced into the House of Representatives. The Bill – declared by the Treasury to progress the most significant changes to Australia’s insolvency framework in 30 years – implements the insolvency reforms to support small business, announced by the Government in September. The reforms are intended to reposition the nation’s insolvency system, reduce the costs of external administration for small businesses to ensure greater economic dynamism and help small businesses through the recovery phase of the pandemic. See the Treasury’s media release.
JobMaker Hiring Credit legislation passes both Houses of Parliament. The Jobmaker Hiring Credit package, which passed both houses of Parliament last week, allows certain entities to access a JobMaker Hiring Credit for eligible employees. The JobMaker Hiring Credit is a fixed amount of $200 per week for an eligible employee aged 16 to 29 years and $100 per week for an eligible employee aged 30 to 35 years, and is paid quarterly in arrears by the ATO. The JobMaker Hiring Credit will not be available to entities which have not increased their headcount and payroll. The framework also prohibits employers and employees from entering into artificial schemes to gain access to, or increase, the JobMaker Hiring Credit. Employers who seek to obtain the JobMaker Hiring Credit should take care to ensure they meet all of the requirements, and keep in mind their existing obligations under fair work legislation. See the Treasury’s media release.
ASIC announces further extension of financial reporting deadlines. ASIC has extended the deadline for both listed and unlisted entities to lodge financial reports by one month for balance dates up to and including 7 January 2021, where the reporting deadline has not been passed. The extended deadlines will assist those entities whose reporting processes take additional time due to current remote work arrangements, travel restrictions and other impacts of COVID-19. ASIC has encouraged that, where possible, entities should continue to lodge within normal statutory deadlines (ie within 3 months after the end of the entity’s financial year) – the reason being the information needs of shareholders, creditors and other users of financial reports. Listed entities seeking to rely on this extended deadline should ensure that the market is kept sufficiently informed of their intentions to do so, and their anticipated timing for the release of their financial reports. See ASIC’s media release.
ON THE HORIZON
Financial services back in the spotlight. Over the past week, numerous reforms and reports have been announced in response to the Hayne Royal Commission recommendations, including the release of APRA’s revised CPS 511 remuneration prudential standard and the introduction of the Treasury’s package of legislation (see media release with respect to the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 and Corporations (Fees) Amendment (Hayne Royal Commission Response) Bill 2020). ASIC has also released its report on the “buy now pay later” industry, a likely prelude to regulatory action. We think that after a brief hiatus during the COVID-19 pandemic, the regulatory spotlight is likely to return to the financial services sector and not just the banks, as attention turns to the myriad non-traditional online financing options now available to consumers.