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 ASIC’s market integrity update, Treasury’s proposal to review the operation of recent FIRB reforms, proposed changes to Australia’s continuous disclosure laws and changes to director resignations, and consider key takeaways from the recent earnings season.


ASIC issues its February 2021 Market Integrity Update.  ASIC has published its Market Integrity Update for February 2021, containing regulatory developments and issues affecting market intermediaries.  The key items in this update include observations of retail market conduct risks caused or exacerbated by COVID-19 as identified by IOSCO’s Retail Market Conduct Task Force, ASIC’s warnings with respect to recent volatility in US securities and a reminder with respect to professional indemnity insurance requirements for AFS licensees providing financial services to retail clients. See ASIC’s Market Integrity Update.

Treasury announces an evaluation of the foreign investment reforms that commenced on 1 January 2021. The evaluation is considering the impact of the reforms and their implementation on foreign investment in Australia and the broader Australian economy, and whether the right balance is struck between welcoming foreign investment and protecting Australia’s national interests. The review is to be completed by 10 December 2021.  See Treasury review page and Terms of Reference.


Proposed changes to Australia’s continuous disclosure laws.  The Federal government has announced that it proposes to make permanent changes to Australia’s continuous disclosure laws with the Treasury Laws Amendment (2021 Measures No. 1) Bill, in response to the Parliamentary Joint Committee on Corporations and Financial Services’ report into Litigation Funding and Regulation of the Class Action Industry, released in December 2020. The report suggested that a mental element should be incorporated into the continuous disclosure obligations in order to mitigate against opportunistic class action litigation in respect of failures to disclose material information in a timely manner.  Such a change would bring Australia’s continuous disclosure laws into line with the US and UK, and is intended to balance the benefit of continuous disclosure obligations with the cost imposed on entities and officers by securities class actions. Under the Bill, the key changes are that entities and officers will only be liable for civil penalty proceedings in respect of the continuous disclosure obligations where they have acted with “knowledge, recklessness or negligence”, and entities and officers will not be liable for misleading and deceptive conduct unless the requisite mental element is proven. While these proposed changes would raise the bar to establish a breach of continuous disclosure obligations, shareholder plaintiffs are likely to react nimbly in reframing their cases to incorporate a mental element. Read G+T’s article on the proposed changes.  The changes have been welcomed by the AICD, with Managing Director and CEO Angus Armou, stating: “Australia’s securities class action settings have been out of step with the rest of the world, making us a lucrative market for litigation funders and driving adverse consequences for businesses, shareholders and the economy generally. The amendments announced today will discourage opportunistic securities class actions which were being driven by funders’ returns rather than the interests of claimants.” See AICD’s media release.

Amendments to the Corporations Act regarding director resignations take effect.  Under new sections 203AA, 203AB and 203CA of the Corporations Act, the effective date of a director’s resignation will now depend on when ASIC is notified of the resignation.  A resignation will take effect from the day the person stopped being a director if ASIC is notified within 28 days, or in any other case, on the day written notice is lodged with ASIC stating that the person has stopped being a director. A director’s resignation will have no effect if that company does not have at least one director at the end of the day that the resignation takes effect.  Although this change was introduced as part of ASIC’s attempt to combat illegal phoenixing activities, Directors should note that even their “ordinary course” resignations will only take effect upon notification to ASIC, and it will be incumbent on the exiting director to ensure that this occurs in order to avoid ongoing director liability.  While the relevant provisions commenced on 18 February 2021, they were subject to a transitional provision meaning that they only apply in relation to a person's resignation as a director of a company if the person stopped being a director of the company on or after the day that is 12 months after the day that they commenced.


Earnings season reflects Australia’s recovery from COVID-19.  Shareholders can expect solid dividend earnings from across corporate Australia, including mining, thanks to a strong iron ore price, banking, retail and healthcare.  Overall it appears companies have benefited from the government stimulus aimed at keeping Australians in jobs, coupled with low interest rates.  With companies flush with cash, we expect the drive to raise capital in 2020 to give way to more M&A activity in 2021.  However, we also expect to see more definitive forward earnings guidance to emerge following the COVID-19 induced hiatus, and there is the potential for this to disappoint if market expectations have over-shot reality.  We note that, notwithstanding robust financial performance, several larger corporates have continued to indicate the “outlook is uncertain” in light of the anticipated withdrawal of Government stimulus and the transition to a “new normal” global economy in the aftermath of the virus.

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