30/03/2020

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 latest governmental and regulatory developments in response to COVID-19.

YOUR KEY BOARDROOM BRIEF

ASIC recalibrates regulatory priorities to focus on COVID-19 challenges. ASIC’s announcement last week is intended to foster a regulatory environment in which companies are able to address their immediate priorities and the needs of their customers created by the pandemic.  Key takeaways from ASIC’s statement are: (i) in coordination with the Council of Financial Regulators, ASIC will also prioritise matters where there is the risk of significant consumer harm, serious breaches of the law, risk to market integrity and time critical matters until at least 30 September 2020; (ii) a number of non-time critical matters such as consultation, regulatory reports and reviews (including, for example, on executive remuneration) and on-site supervisory work have been suspended; (iii) ASIC is open to providing relief or waivers from regulatory requirements where warranted, including in relation to secondary capital raisings and audits by listed companies; (iv) ASIC is exploring options to speed up financial institution remediation payments to customers; (v) its enforcement activities and investigations are continuing; and (vi) key business as usual functions remain in place (including, for example, its registry operations and services and whistleblower reporting mechanisms). See ASIC’s media release

Shareholder meetings. Directors of public companies may find our G+T article “ASIC facilitates ‘social distancing’ in AGMs” helpful for AGM planning and related considerations.  See also recent AGM guidance published by the Governance Institute Australia.  Directors should note, however, that ASIC’s “no action” relief only applies to AGMs and not EGMs – in the latter case companies will need to ensure that they have the capacity to effectively hold the meeting before it is convened.

Government responses to COVID-19.  Directors should continue to check in on the Commonwealth Treasury coronavirus information site from time to time for the latest information. Recent developments include the following:

  • Coronavirus Economic Response Package Omnibus Bill receives royal assent – the new laws implement a number of measures including in relation to instant asset write-off, cash flow for employers, household payments, childcare, Medicare levies, superannuation drawdowns and temporary relief for financially distressed individuals and businesses. The latest “Update from the Australian Government’s Economic Response to the Coronavirus” provides a good overview to Directors of the current global and domestic situation and the Australian Government’s stimulus and relief packages.  See also the ATO’s media release for information on how people can access the tax or superannuation measures.
     
  • Treasury defers 2020-21 Budget – in order to allow more time to consider the economic and fiscal impacts of COVID-19, the Federal Budget will be postponed until 6 October 2020.  See Treasury’s media release.
     
  • FIRB considering refunds on fees for withdrawing foreign investment applications – FIRB has confirmed its preparedness to consider refunds where investors are unable to proceed with investment decisions owing to domestic and global measures taken in relation to COVID-19.  Applicants must clearly state the reasons for their remittance request at the time of withdrawal.  See FIRB’s media release. Over the weekend the Government also announced that the threshold for assessment of all foreign investments would be reduced to zero as a “temporary measure” to prevent Australian companies falling to opportunistic acquirers.  Timeframes for review of applications will be increased from 30 days to six months. See the Treasurer’s media release. We have significant concerns that this change will complicate efforts to recapitalise Australian companies by depriving them of access to foreign capital when they need it most, including by means of entitlement offers backstopped by foreign investors.  However, we understand that FIRB may be prepared to prioritise applications involving emergency capital raisings. See G+T article “New rules on foreign investment announced under FATA” for an overview of Australia’s foreign investment rules, the changes and key implications.

ACCC responses to COVID-19.  The ACCC has granted interim authorisation for supermarkets to coordinate grocery supplies and medical equipment distributors to coordinate the supply and potential manufacture in Australia of ventilators, testing kits, personal protective equipment and other medical equipment needed to deal with the COVID-19 pandemic.

COVID-19 – are you affected by force majeure?  The widespread disruption to business and society has hindered the ability of many contracting parties to fulfil their contractual obligations.  Directors should review contractual arrangements for inclusion of a force majeure clause and consider whether, and if so how, the company can rely on it.  Directors should be conscious of any procedural requirements to access relief.  For a continuing force majeure event such as COVID-19, it will be critical to notify counterparties as soon as it becomes obvious the company’s ability to perform is prevented. See our G+T article “COVID-19: are you affected by force majeure? You may need to act promptly or risk losing relief” for more guidance.

Continuous disclosure obligations to be front of mind.  The recently announced federal and state government restrictions on business including the shutdown of non-essential business and closure of state / territory borders means listed entities are facing considerable uncertainty and, for some, material impacts on their operations.  See G+T’s article “COVID-19 and your continuous disclosure obligations” and “Continuous disclosure obligations – How ASX200 entities have responded” for a discussion of key considerations and themes emerging from our review of recent ASX announcements, which may be of particular interest to Directors of companies which have published earnings guidance.  Listed entities must remain proactive as new information arises to assess whether their continuous disclosure obligations are triggered and if so, what is needed to discharge them.

Takeovers Panel relocates to new premises. Its new premises are now at Level 16, 530 Collins Street, Melbourne.

THE WEEK AHEAD

How will the world look after the pandemic?  As the lockdown in Wuhan, the Chinese city where the COVID-19 outbreak began, begins to be lifted, countries around the world (including Australia – with the announcement of a further tightening of social distancing rules over the weekend) went into lockdown or imposed severe curbs in an attempt to slow the spread.  Output in most countries is expected to start recovering once new coronavirus infections peak and head down. The return to work protocols being enacted in China will hopefully provide other countries with a roadmap to gradually improving productivity.

Expertise Area
""

Our COVID-19 hub collates important articles and legal advice on various aspects of COVID-19 on how it may impact your business.