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 Governance Institute’s risk management survey, recent ASIC guidance on securities trading by directors of listed companies in a COVID-19 environment, FIRB’s annual report for 2018-2019 and further financial reporting deadline extensions by ASIC.


Governance Institute releases Risk Management Survey 2020.  The Governance Institute Risk Management Survey Report, based on an online survey of 399 governance and risk professionals and senior executives, provides insights into the current risk and governance landscape in Australia. The report found that: (i) almost 40% of businesses are not regularly testing their risk and crisis plans; (ii) just 11% regularly run scenarios around risk events to test how their organisation and employees will respond; and (iii) among the top five risks identified for the next three years were cyber-crime (50%), talent attraction and retention (48%), disruption and failure to innovate (44%), economic shock (40%), employee conduct (39%) and risk from increased competition (37%).  Results supported a broad commitment to the new whistleblower regime.

ASIC caution to listed company directors trading their securities.  Director securities trading can be fraught with risks particularly given the increased volatility caused by the COVID-19 pandemic. ASIC’s recent guidance reminds directors of listed companies contemplating security purchases or sales to consider: (i) any legal restrictions on their ability to buy and sell interests in company equity, including the prohibition against insider trading and restrictions in their securities trading policy; and (ii) the impact it may have on market and investor perception of their reputation, the entity, the market generally, and about information asymmetries between insiders and other investors more broadly.  The guidance reiterates the need to: (i) consider what information directors possess and factor in the current uncertain and volatile trading environment; (ii) ensure changes to director interests and notifiable benefits are all promptly disclosed; and (iii) avoid conflicts of interest (eg, use of security-backed margin loans), which may tempt directors to pursue short-term gains to avoid margin calls at the expense of the entity's longer-term outlook.  In our view, ASIC’s cautionary tone is justified in the current environment, perhaps even more so as business conditions return to a “new normal” state and boards begin to consider whether and if so what earnings guidance should be provided. 

FIRB releases annual report.  Of potential interest to Directors impacted by FIRB’s recent investment screening changes (click here for the latest developments), the FIRB’s 2019 annual report provides some colour on its work, approval trends and compliance activities. It highlights: (i) the launch in January 2020 of the Critical Minerals Facilitation Office to support the development of critical mineral projects; (ii) 2019/2020 federal budget funding to support identification and assessment of national interest issues arising from foreign investment at the sectoral level; and (iii) the upcoming report, expected 7 September 2020, of the Senate Economics Reference Committee Inquiry into foreign investment proposals.  The US remained the largest source country of proposed investment by value, followed by Canada, Singapore, Japan and China. The reduction in proposed investment value from China reflects an ongoing downward trend in the value of Chinese investment from its peak in 2015‑16, which FIRB has attributed to China’s internal domestic policy including increased scrutiny of outbound investment and stricter capital controls.  Despite an increase in value of proposed transactions, the number of approvals dropped by almost 2,500 compared with the previous year (mainly in the residential real estate sector).  FIRB continues to follow foreign investment screening regime reforms in key economies (eg, the US, UK, China and New Zealand) and enhancements to government powers to scrutinise investment in sensitive sectors.  A key message was the need to engage the FIRB as early as possible, particularly where proposals relate to sensitive assets such as critical infrastructure.

ASIC further extends financial reporting deadlines and amends its ‘no action’ position on AGMs.  Last week, ASIC announced the following further measures to assist companies grappling with the impacts of COVID-19:

  • Further financial reporting deadline extensions:  Under ASIC’s additional relief measures: (i) unlisted entities will have an additional month to lodge financial reports for financial year ends from 31 December 2019 to 7 July 2020; and (ii) listed entities will have an additional month to report for full year and half-year financial reports for financial year ends that fall in the period between 21 February 2020 and 7 July 2020.  Listed entities must inform the market when they rely on the extended period for lodgement and ASIC has noted that it may also be desirable to explain the reasons for doing so.  Despite these new measures, ASX listed entities will still need to lodge their Appendix 4E preliminary financial reports under ASX Listing Rules 4.3A and 4.3B by the due date (eg. 31 August 2020 for 30 June 2020 year ends).  If the entity does not have audited accounts by that date, it will need to lodge unaudited accounts with its Appendix 4E.  ASIC has reiterated, that, where possible, entities should continue to lodge within the normal statutory deadlines, having regard to the information needs of shareholders, creditors and other users of their financial reports, or to meet borrowing covenants or other obligations.
  • Amendments to its ‘no action’ position for AGMs: ASIC has extended its ‘no action’ position to apply to public companies with financial year ends falling between 31 December 2019 and 7 July 2020, which will now have up to seven months (rather than five) after their financial year end to hold an AGM.  ASIC recommends that public companies opting to delay their AGM refrain from holding it in the peak holiday period in late December 2020 and early January 2021.  Directors are reminded that ASIC’s ‘no action’ stance does not preclude third parties from taking legal action.  For companies that have relied on ASIC’s extension of time for lodging financial reports, ASIC’s ‘no-action’ position will allow for additional time to distribute financial reports to members prior to the AGM.


Australia-China trade.  There is likely to be renewed focus this week on the Australia – China trade relationship after China imposed import restrictions on Australian barley and beef last week.  While some have expressed concerns regarding Australia’s annual US$80 billion iron ore trade, most commentators have dismissed suggestions that China would look to switch to importation from Brazil.  Coal, however, might be a different story.  Trade tensions have risen following Australia’s support for an independent inquiry into the source and handling of the COVID-19 pandemic.

Postponement of Hayne Royal Commission measures.  Owing to COVID-19, the Federal Government has pushed out the implementation of all measures by six months.  See the Treasurer’s media release.

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