Insights

21/05/18

Boardroom Brief: Week commencing 21 May 2018

Welcome to Edition 63 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 Chair James Shipton delivers keynote address ‘The Trust Deficit and Corporate Australia’. On 17 May 2018, ASIC Chair, James Shipton, delivered a keynote address on ‘The Trust Deficit and Corporate Australia’ at the Australian Council of Superannuation Investors Annual Conference. The speech explored the trust deficit in Australia’s corporations and finance sector, culture and systemic conflicts of interest, the regulatory system and ASIC’s role in the regulatory structure. Consistent with ASIC’s focus, Mr Shipton’s address centred on the desire to promote a strong, ethical corporate culture. A key concern is that financial services companies have shifted their focus from managing other people’s money to exploiting opportunities to maximise earnings. Directors should note the emphasis in the speech for a drive towards “good business culture” as a cornerstone in corporate Australia, serving as yet another example of the ramifications of the Royal Commission. As noted in previous editions of Boardroom Brief, we expect to see corporate governance and culture issues front and centre stage for some time, with increasing pressure being placed on boards to take responsibility for directing cultural change within their organisations. See the full speech here.

ASIC consults on short selling proposals. On 14 May 2018, ASIC published Consultation Paper 299, which sets out its proposals relating to both naked and covered short selling. ASIC’s consultation coincides with the sunsetting of a number of related class orders, providing an opportunity to review its regulatory approach to short selling. ASIC’s aim is to consolidate all relief relating to short selling into a single ASIC instrument. Specifically, ASIC is seeking feedback on its draft instrument which includes granting legislative relief to allow naked short sales: (i) of unissued products during a deferred settlement trading period; and (ii) in connection with IPO selldowns made through a special purpose vehicle. There is also a proposal to calculate short positions by reference to the end of the calendar date in the reporting entity’s location (recognising that global firms operate in several time zones). ASIC seeks submissions from the public, which are due by 20 June 2018. ASIC intends to issue the final instrument before October 2018. See ASIC’s media release for more details.

Government consults on measures for tax treatment of stapled structures. On 17 May 2018, the Government released exposure draft legislation and explanatory materials on its proposed measures to address the perceived sustainability and tax integrity risks posed by 'stapled structures'. All elements (except the thin capitalisation measures) will commence on 1 July 2019. A transitional period of seven years for stapled structures and 15 years for infrastructure assets will apply for investments in existence on 27 March 2018. The thin capitalisation element will apply to income years on or after 1 July 2018 (with no transitional period). Feedback can be given until 31 May 2018. See G+T article “Flip-flopping on policy – the Australian Government’s approach to MITs and stapled structures” for background information and what fund managers should do to prepare for them.

THE WEEK AHEAD

JMEI application window for 2018-2019 opens next Friday. Applications to participate in the Junior Minerals Exploration Incentive (JMEI) for the 2018-2019 income year can be made from 1 June 2018. Junior explorers considering a 2019 capital raise can start preparing their applications (and associated supporting working papers) now, ready ahead of the opening date for applications. The application window will close on 30 June 2018.

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