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 IOSCO’s guidance on going concern assessments and disclosure, the AICD’s update on board diversity across ASX 200 and ASX 300 companies and amendments to the regime for cancellation, deferral or reduction under the ASX Listing Rules. We also consider the impact of the conclusion of JobKeeper payments on the nation’s unemployment rate and general economic recovery.
Governance and Regulation
IOSCO statement on going concern assessments and disclosures
The International Organisation of Securities Commissions has released a statement welcoming the International Accounting Standards Board’s (IASB) recent guidance on going concern disclosures during COVID-19. That guidance indicates that where directors and management have determined that material uncertainties do not cast significant doubt on the ability of a company adversely affected by COVID-19 conditions to continue as a going concern, it is important for investors to receive complete information about the significant judgments that may have been exercised in arriving at that conclusion. The IASB notes this is particularly important where judgments about the ability of management to execute plans to mitigate the effects of material uncertainties are critical to that conclusion. These considerations should be front of mind for both management and non-executive directors in preparing upcoming financial statements. See IOSCO’s statement.
AICD update on board diversity
AICD has revealed that the rate of women being appointed to director roles in 2021 on the ASX 200 and 300 is nearing the rate of men. Women now occupy 32.9% of ASX 200 board positions and 30.8% of ASX 300 positions as at 28 February 2021. The AICD notes that, while the appointment rate is encouraging, there are still more than a third of boards in the ASX 200 that have not yet reached the minimum standard of 30% women on their boards. In addition to this standard provided in the ASX Corporate Governance Council’s Principles and Recommendations, the AICD encourages all companies to embrace a board diversity model of 40:40:20, where boards have at least 40% women and 40% men directors as good practice. See the AICD’s media release.
ASX finalises Listing Rule amendments governing cancellation, deferral or reduction of dividends
Last year, ASX released a consultation paper for proposed amendments to the Listing Rules. ASX has now released a Consultation Response to that consultation paper, which outlines a number of amendments to the Listing Rules which will come into effect on 5 June 2021. While many of the amendments are mechanical in nature to facilitate the introduction of various online forms, others are more substantive and material to directors’ decision-making moving forward. Importantly, ASX has introduced requirements for the cancellation, deferral or reduction of previously announced dividends, distributions or interest payments. As reported in previous editions of Boardroom Brief, the cancellation and/or deferral of dividends became a common occurrence during the onset of COVID-19 and the uncertainty in relation to this created administration headaches and market integrity issues. The amendments will now require that where an entity has announced it will make dividends, distributions or interest payments, it must immediately notify ASX of an intention to cancel or defer those payments. Where the entity has already nominated a record date for those payments, it may only cancel or defer them if (1) it would be contrary to law to make the payment on the announced date (an example might include where the paying company faces an imminent solvency issue) or (2) the entity has given ASX notice of the change on the business day prior to the ex date specified in the relevant announcement. These announcements must include an explanation satisfactory to ASX of the entity’s reasons for cancelling, deferring or reducing the payment. When deciding whether to cancel, defer or reduce these payments, directors will need to ensure they are comfortable they have sufficient reasoning to justify this decision.
Over the horizon
The end of JobKeeper not expected to impact significantly on Australia’s labour market
Australia is currently experiencing a rapidly recovering employment market. In February of this year, the number of job advertisements were at a 2.5 year high, and in that same month, 89,000 new jobs were created. However, on Sunday the Government’s JobKeeper wage subsidy came to an end. In the short-term, the end of JobKeeper may result in some job losses and reduction in hours. While this may be seen as the first major step in our economy’s return to “normal”, the effects on Australia’s labour market recovery are not expected to be significant. We can expect to see the nation’s unemployment rate improve as the economy continues to recover, with greater focus likely to be placed on the “unintended consequences” of the Government’s stimulatory policies (such as plummeting housing affordability in most capital cities).