26/08/2019

Welcome to Edition 124 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.

In this Edition, we consider the Government’s roadmap for implementing the Hayne Royal Commission’s recommendations, predicted M&A activity for H2 2019, ASX’s compliance update and ASIC’s enforcement update for H1 2019.

YOUR KEY BOARDROOM BRIEF

Treasury releases post Royal Commission implementation roadmap. The Roadmap sets out how the Government will implement each of the Royal Commission’s 76 recommendations. Excluding the reviews planned for 2022: (i) by the end of this year, more than 20 commitments (around one third of the Government’s commitments) will have been implemented or have legislation before Parliament; (ii) by mid 2020, more than 50 commitments (close to 90% of commitments) will have been implemented or have legislation before Parliament; and (iii) by the end of 2020, the remaining Royal Commission recommendations requiring legislation will have been introduced. See the Treasurer’s media release.

Predictions of an uptick in M&A for H2 2019. A report issued by Intralinks, a leading financial technology services provider, has predicted the following H2 2019 trends in the global M&A market through to Q4 2019: (i) number of M&A deals to be announced is expected to increase by around 5% year-over-year; (ii) the strongest growth is expected in the energy & power, industrials and materials sectors; and (iii) the total worldwide number of M&A deals announced in the full year 2019 is expected to fall for the second consecutive year due to the drop in M&A announcements in H1 2019. The report underlines the "vortex of volatility" that Directors involved in M&A are having to navigate, particularly given the changing geo-political context under the Trump Presidency.

ASX releases compliance update.  ASX’s latest update notes the following:

  • ASX has expressed concern with announcements seemingly intended to “ramp” the price of an entity’s securities rather than inform the market (eg, just before a capital raising to support the share price or just after to facilitate a profitable exit for investors who participated in the raising). Publication of corrective announcements or, worse, suspension can result from such “ramping” announcements. ASX reminds Directors they must be able to explain why each announcement made comprises market sensitive information.
  • Issuing “loyalty” securities (sometimes called “bonus” or “reward” securities) is on the rise. ASX recommends applying to ASX for in-principle advice on Listing Rules 6.1 and 12.5 compliance of any proposed “loyalty” security terms.
  • Guidance Notes 8 (Continuous Disclosure), 9 (Disclosure of Corporate Governance Practices) and 27 (Trading Policies) have been updated.
  • A number of listed entities intend to adopt the 4th Edition of the ASX Recommendations early.

ASIC publishes enforcement update for the H1 2019. ASIC’s Enforcement Update provides a high-level overview of its enforcement priorities and key decisions across corporate governance, financial services, market integrity and small business compliance during the period 1 January to 30 June 2019. Between July 2018 and June 2019, ASIC increased: (i) the number of ASIC enforcement investigations by 20%; (ii) enforcement investigations involving the big six (or their officers or subsidiary companies) by 51%; and (iii) wealth management investigations by 216%.  Of note to Directors, ASIC’s Office of Enforcement is now in place; accelerating court-based enforcement matters and pursuing the harsher penalties now available to “hold gatekeepers to account”. You can listen to ASIC’s Enforcement Update podcast here.

ASIC disqualifies another director for ‘phoenix’ activity. ASIC’s five-year disqualification of yet another director last week for phoenixing — being when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts to creditors — underlines ASIC’s continued enforcement focus in this area. It follows the convictions of two directors last September and one in May this year for engaging in such activity, where one conviction resulted in 18 months’ imprisonment. ASIC’s preparedness to make an example of directors breaching the rules suggests we can expect to see an uptick in similar investigations, disqualifications and convictions across 2019/20. ASIC’s media release encourages suspected phoenix activity to be reported to the Phoenix Taskforce.

THE WEEK AHEAD

Trade War. After a series of inflammatory tweets by President Trump over the weekend, all eyes will again be focussed on the potential implications of an escalating trade war between the US and China for global growth. Metal prices are already showing signs of strain – with the notable exception of nickel (see below) which is benefiting from doubts over supply. 
 

Periodic reports due this Friday. Preliminary final reports (June year-end) and statutory half year financial reports (except mining exploration companies) (December year-end) are due this Friday 30 August 2019.

AGM season. For companies with a 30 June year-end, AGMs will need to be held by 30 November. Companies are reminded that draft Notices of Meeting must be submitted to ASX for review.

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