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The Department of Home Affairs has issued its draft guidance “Modern Slavery Act 2018: Draft Guidance for Reporting Entities” (Draft Guidance) for the new Modern Slavery Act 2018 (Cth) (the Act).
Welcome to Edition 36 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.
Reforms to stop corporate avoidance of employee entitlements at taxpayers’ expense. Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP in a joint media release with Minister for Employment, Senator the Hon Michaelia Cash, has stated that the Government will introduce new laws to stop corporate misuse of the Australian Government’s Fair Entitlements Guarantee (FEG) scheme. Directors should note that the proposed changes may, amongst other things lead to penalties for directors and other persons who engage in transactions which are directed at preventing, avoiding or reducing, employer liability for employee entitlements, albeit the reforms are targeted at more egregious conduct in this area and should not affect the overwhelming majority of companies who are doing the right thing. These changes build on the Government’s commitment to pursuing recovery of FEG payments from company directors through the FEG Recovery Program, which was established by the Coalition Government in 2015. This legislation will also support the Australian Government’s ‘Comprehensive Package of Reforms to Address Illegal Phoenixing’ announced on 12 September 2017 as reported previously in Boardroom Brief. See Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP’s media release.
“Corporate opportunity doctrine” - directors take note. A recent Supreme Court of Queensland decision has highlighted that directors who intentionally divert opportunities to other businesses in which they are interested will likely breach their statutory and fiduciary duties to the company. The Court found that by diverting a number of opportunities, including building and construction contracts, the directors had breached their statutory duties under the Corporations Act 2001 (Cth) as well as their general law fiduciary duties. The directors unsuccessfully argued that there was no breach of duty because their fiduciary relationship with the company was qualified. See DTM Constructions Pty Ltd trading as QA Developments v Poole  QSC 210. Directors also need to be conscious of situations not only of conflict of interest and duty, but also conflict between duties – which can be particularly problematic when an individual holds multiple directorships in the same industry.
ASX Group Monthly Activity Report – September 2017. ASX released its monthly activity report for September 2017 in which value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 0.5% in September 2017. This performance was similar to other major markets, including Singapore down 1.7%, Hong Kong down 1.5% and the UK down 0.8%. Germany was up 6.4%, Japan up 3.6% and the US up 1.9%. See ASX’s media release for more information.
Don’t delay in appointing your nominee director! A recent Supreme Court case in New South Wales illustrates the need for careful drafting of nominee director appointment rights. Where a right to appoint a nominee director has not been exercised, and the maximum number of directors has already been reached, that right may effectively be lost. Further, where directors have the right to change the maximum number of directors, that right may be exercised to reduce the maximum number, even if it means that an existing director would need to resign (subject to the directors’ duties to act in good faith in the best interests of the company and for a proper purpose). For further detail please see G+T client publication Don’t delay in appointing your nominee director!: Shub v Mon Purse Pty Ltd  NSWSC 1187.
GST and State Taxes. This week the Productivity Commission will release its interim report on its investigation into the GST carve-up in Australia. While any recommendations will require time (and political will) to implement, we may begin to see some long-overdue discussion of State tax reform as the price for a more equitable and efficient GST carve-up. That is unlikely to neuter the escalating debate over the proposed gold royalty hike in the WA State Budget, although the State Opposition may still kill off the measure in the Upper House, following the Liberal Party meeting this week to determine its stance on the issue.
Business investment lifts. In the Statement accompanying the Reserve Bank of Australia’s (RBA) Monetary Policy Decision on 3 October 2017, RBA Governor Philip Lowe noted conditions in the global economy have improved and the Australian economy expanded by 0.8 per cent in the June quarter. This outcome and other recent data are consistent with the Bank's expectation that growth in the Australian economy will gradually pick up over the coming year. RBA Governor Philip Lowe struck a positive tone on business investment in stating there have been more consistent signs over recent months that non-mining business investment is picking up and noted a consolidation of this trend would be a welcome development. See media release.