Welcome to Edition 69 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.
KEY BOARDROOM BRIEF
ASIC releases market integrity update. ASIC has released its Market Integrity Update for June 2018. This update includes: (i) a warning that companies should be alert to “window dressing” (i.e. market manipulation by those who have a financial incentive to influence share prices around key reporting dates); (ii) information about the new Australian Financial Complaints Authority; and (iii) a summary of ASIC’s 2018–19 priorities, including technology and operational risk and the new sell-side research guidance. For more on these topics, see also G+T articles “Transitional steps to AFCA announced” and “Our analyst is in hiding: what companies need to know about ASIC’s guidance on sell-side research”. Directors should note that ASIC’s move to more closely examine the operation of share-price linked remuneration arrangements may well lead to some “please explain” requests being issued by the new regulator if anomalous results are detected.
Ipso Facto reforms come into effect on 1 July 2018. The reforms, which affect contracts in all industries and segments of the market, introduce automatic stays on the enforcement of certain ipso facto provisions. Unless excluded (there are extensive exclusions under the related regulations), the stay provisions now apply to all contracts, agreements or arrangements entered into on or after 1 July 2018. This ipso facto stay affects the ability of counterparties to exercise termination rights or other contractual rights under affected contracts once a company enters one of a number of specified insolvency or restructuring procedures. Directors should ensure management is reviewing key contracts to see how the company could be impacted by the reforms. See the amended Bill here and the exceptions to the reforms in the declaration and regulations.
Takeovers Panel publishes revised guidance on rights issues. On 27 June 2018, the Takeovers Panel published its final revised Guidance Note 17, which clarifies the Panel’s approach to rights issues. The updated guidance focuses on the Panel’s approach to mitigating potential control effects (including the use of shortfall facilities and other dispersion strategies). It also clarifies that a rights issue will generally be okay if there is a clear need for funds, provided that an appropriate dispersion strategy has been put in place. Directors contemplating a rights issue should familiarise themselves with the amendments, which are best described as being “evolutionary, not revolutionary” in nature. See the Panel’s media release and public consultation response statement.
Modern slavery legislation introduced to Parliament. On 28 June 2018, the Modern Slavery Bill 2018 was introduced into Parliament; its overarching purpose being to require entities with over $100 million annual consolidated revenue (including corporate Commonwealth entities and foreign entities carrying on business in Australia) to report on the risks of modern slavery in their operations and supply chains and actions to address those risks. The explanatory materials envisage the establishment of an annual Modern Slavery Reporting Requirement in an effort to increase transparency for consumers and investors as well as to improve workplace anti-slavery practices. See also media release from the Assistant Minister for Home Affairs, the Hon Alex Hawke MP, and the Government’s fact sheet on the reporting requirements.
THE WEEK AHEAD
Window for ASIC-regulated entities submitting business activity metrics is now open. Ahead of ASIC confirming its actual regulatory costs for the 2017–18 financial year in November 2018, all ASIC-regulated organisations must log on to a new online ASIC portal between July and September to submit or validate their business activity metrics. Each firm’s ASIC contact should have received from ASIC a unique security key for the portal and information on the process. ASIC’s November publication will also include business activity metric data provided by industry, which should enable entities to better estimate their individual levy.
Government’s consultation on reforms to address corporate misuse of the FEG scheme closes next Monday. As reported last month, the Government is consulting on exposure draft legislation and an explanatory memorandum which set out proposed reforms to the operation of the taxpayer-funded Fair Entitlements Guarantee (FEG) scheme. These reforms are intended to discourage employers from structuring their corporate affairs to avoid paying employee entitlements when a business becomes insolvent. Submissions can be made until 9 July 2018.