02/11/2020

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 Foreign Investment Reform Bills introduced to the Australian parliament, the ACNC charity risk review program, ASX’s updates on the CHESS Replacement system and for a defendant's in a shareholder class action. We also look ahead to the US election.

YOUR KEY BOARDROOM BRIEF

Foreign Investment Reform Bills introduced to parliament. The Australian government has introduced the Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 (Cth) and Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 (Cth) (Foreign Investment Reform Bills) into the House of Representatives. The combined effect of the Foreign Investment Reform Bills, if passed, will cement the major reforms to the foreign investment review regime announced in June of this year, including giving the Treasurer a “last resort” ability to issue a divestment order where there is no other remedy for a national security risk, and establishing a new register of foreign owned assets to record certain foreign interests acquired in Australian land, water rights and business acquisitions that require foreign investment approval.  The Foreign Investment Reform Bills are a further measure implemented to address the increasing scrutiny around foreign investment and national security.  The implications of the Foreign Investment Reform Bills on investment certainty and Australian M&A will become clearer following the Senate Committee’s inquiry and report later in the year.

ACNC to introduce charity risk review program. Directors of charitable companies will be aware of the recent review of enabling legislation which was completed by the Federal Government in March 2020 (you can find a copy here), with a view to enhancing governance standards in this critical sector.  The Federal Government has since announced funding of $2.9 million to conduct risk reviews of charities, in a move welcomed by the ACNC. The funding will roll out over three years to enable the ACNC to undertake field-based compliance reviews to assess risk in the charities sector, intervene with charities before significant issues arise and, where possible and appropriate, provide assurance to the public to maintain confidence in the sector. See the ACNC’s media release.

ASX releases response to consultation feedback for CHESS Replacement. The ASX’s CHESS replacement system (replacing the CHESS system with a blockchain enabled trading platform) represents one of the most significant changes to the listed company landscape in decades, so it is not surprising that ASX is proceeding with caution.  Recently, ASX released its response to consultation feedback received on the June 2020 CHESS Replacement: Revised Implementation Timetable Consultation Paper. ASX’s response noted that feedback demonstrated that COVID-19 continues to have an impact on the industry, which resulted in requests for substantially more post-trade processing capacity in response to the extreme increases in trading volumes on the ASX platform during the most volatile period of the pandemic in March. To provide sufficient time to implement the CHESS Replacement, ASX has pushed back the go-live date to April 2023.  See ASX’s media release

First defendant win in a shareholder class action case. The Federal Court has dismissed a securities class action brought against Worley Limited (Worley), an ASX-listed professional services provider, by a group of shareholders alleging breaches of continuous disclosure laws and the prohibition on misleading or deceptive conduct. The claim related to earnings guidance released by Worley in 2013 based on a budget that was not released to the public. This was followed by revised-down earnings guidance, after which Worley’s shares fell steeply. The Court found that the continuous disclosure obligations under the Corporations Act did not apply to the earnings guidance statements, as there was a reasonable basis for the statements, and that the earnings guidance was not materially lower than professional analytical expectations. The Court noted that the applicant’s case was supported mostly by hindsight, with no evidence to contradict Worley. This decision by the Court provides some comfort to Directors of entities releasing earnings guidance, and recognises the impact of hindsight on assessment of such guidance. It is likely this approach will be especially relevant in light of earnings guidance released during COVID-19, given the uncertainty and volatility whch we are continuing to see. See the Court case here.

ON THE HORIZON

US election. The big news over the horizon is the US election, which will take place on 3 November 2020 (with Australians likely to wake to the news of the results on Wednesday, 4 November), to decide whether Donald Trump will be elected for a second term or cede power to Democrat, Joe Biden. The results of the US election will likely inform the trading markets (in the US, Australia and globally) in the coming days, weeks and potentially months.
 

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