A short week this week due to the public holiday in Western Australia.
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 extension of various COVID-19 measurers and responses, including modifications to legislation which permit virtual meetings to be held, allow documents to be executed electronically and enable “low doc” disclosure for certain capital raisings. We also consider ASIC’s new instrument which prevents certain stub equity offers and the impacts of the Treasurer’s review of Australia’s insolvency framework.
YOUR KEY BOARDROOM BRIEF
Government extends legislative amendments permitting virtual meetings and electronic execution. The Treasurer has extended amendments to the Corporations Act 2001 (Cth) allowing virtual meetings and electronic execution of documents until 21 March 2021. The Corporations (Coronavirus Economic Response) Determination (No. 3) 2020, like the previous determination which it replaces, modifies the operation of the Corporations Act and other legislation to permit companies to hold entirely virtual meetings or hybrid meetings, to permit electronic notices of meeting to be dispatched to shareholders, and to expressly allow company officers to validly sign counterparts of documents without both officers needing to sign the same physical instrument, and to do so by electronic means provided certain conditions are met.
Government extends temporary relief from continuous disclosure obligations. The government has also extended temporary amendments to the continuous disclosure obligations that apply to ASX-listed and unlisted disclosing entities under sections 674 and 675 of the Corporations Act to 23 March 2021. This relief provides that entities, their directors and officers will only be liable under the continuous disclosure obligations if there has been "knowledge, recklessness or negligence" with respect to updates on price sensitive information to the market. See the Treasury’s media release. Directors should note that there remains some uncertainty regarding the efficacy of these changes in terms of minimising class action litigation risks.
ASIC extends temporary relief for certain capital raisings. Due to the continued and uncertain impact of COVID-19, ASIC has extended certain capital raising and financial advice relief measures. The capital raisings relief aims to assist listed entities affected by the pandemic to raise capital in a quicker and less costly way without undermining investor protection, by enabling certain “low doc” offers (including rights offers, placements and share purchase plans) to be made to investors without a prospectus, even if they do not meet all of the usual requirements. These relief measures will now be extended to 1 January 2021. See ASIC’s media release.
ASIC finalises stub equity instrument to prevent certain stub equity offers. M&A volumes have been low this year as a result of the uncertainty created by the COVID-19 pandemic. However, many commentators are pointing to the potential for an uptick in activity in 2021 assisted by ample liquidity. We expect private equity acquirers to be particularly active and in this context, the ASIC’s release of ASIC Corporations (Stub Equity in Control Transactions Instrument 2020/734 is timely. In short, the instrument modifies the Corporations Act to prevent stub equity offers of scrip in a proprietary company being made to large numbers of retail target holders in takeover bids and schemes of arrangements. Such structures have become more popular in recent years as a mechanism to provide target shareholders with ongoing economic exposure to the acquired business. Bidders may still make stub equity offers using a public company with mandatory custodial arrangements. ASIC has stated the changes will protect retail investors by upholding the legislative intent of the restrictions on proprietary companies, and should be carefully considered in the context of scrip offers during a takeover. See ASIC’s media release.
ATO reports on JobKeeper extension to 28 March 2021. The JobKeeper scheme has been extended until 28 March 2021. However, employers will now be required to pay eligible employees differing JobKeeper rates depending on the number of hours they work. While employers do not need to re-enrol for JobKeeper, they must notify the ATO of their eligible employees and the employees’ respective rates. Employers must also show that their actual GST turnover has declined in the September 2020 quarter relative to a comparable period. Companies will need to ensure that this is done before 31 October 2020. See the ATO’s media release.
THE WEEK AHEAD
Treasurer announces significant reforms to Australia’s insolvency framework. With the COVID-19 situation in Victoria improving rapidly, we are seeing a significant change in the regulatory and political dialogue towards “restarting the economy”, and the economic and policy settings that will be required to enable this to occur. To this end, the Federal Government has announced that it will undertake a significant reform of Australia’s insolvency framework. The reforms, which are due to take effect on 1 January 2021, subject to the passage of legislation, aim to help more small businesses restructure and survive the economic impact of COVID-19, in a style more in line with the USA’s insolvency law. Key elements of the reforms include a new formal debt restructuring process for small businesses, moving from a rigid one-size-fits-all “creditor in possession” model to a more flexible “debtor in possession” model (which will allow eligible small businesses to restructure their existing debts while remaining in control of their business), complementary measures to ensure the insolvency sector can respond effectively both in the short and long term to increased demand and to the needs of small businesses. See Treasury’s media release.