In this edition of Gilbert + Tobin's Corporate Advisory Update, we focus on key legal developments over the last month which are particularly relevant to in-house counsel.
Extended deadline for 30 June 2021 financial reports
ASIC has extended the deadline for both listed and unlisted entities to lodge financial reports (under Chapters 2M and 7 of the Corporations Act) by one month for entitles with balance dates from 23 June 2021 to 7 July 2021 (and given associated consequential relief). The relief builds on earlier relief announced for certain reporting periods ending up to 7 January 2021.
Note that the extensions do not apply for reporting for balance dates from 8 January 2021 to 22 June 2021 although ASIC states that it will consider relief on a case-by-case basis, where appropriate.
The extended deadlines are to assist with any pressures on resources for the audits of smaller entities and provide adequate time for the completion of the audit process taking into account challenges presented by COVID-19 conditions (including restrictions on travel in Australia and increased staff turnover). However, as ASIC notes, while the extensions would be available for both listed and unlisted entities, the reporting for larger listed entities is unlikely to be affected., and directors should consider the information needs of shareholders and other users of their financial reports, as well as meeting borrower covenants or other obligations, when deciding to depart form the normal statutory deadlines. The deadlines for ASX- listed entities to provide their preliminary reports (which can be unaudited) are unchanged.
ASIC has stated that it will continue to monitor how market conditions and COVID-19-related developments are affecting financial reporting and audit obligations for balance dates after 7 July 2021, but there is currently no indication that further extensions of time will be necessary.
See ASIC’s media release and ASIC Corporations (Amendment) Instrument 2021/315 for further details.
Extension for AGM timing and new guidance around virtual AGMs
ASIC had previously adopted a ‘no action’ position for public companies with a financial year end between 7 January and 7 April 2021 that do not hold their AGMs within 5 months after the end of their financial year (as required by section 250N(2) of the Corporations Act), provided those meetings are held within 7 months of the financial year end. On 23 April 2021, ASIC extended that ‘no action’ position for public companies with financial year ends up to 7 July 2021 who hold their AGMs within 7 months of their financial year end. The extended ‘no action’ position allows additional time for distribution of financial reports to members prior to the AGM for those companies who have relied on the extended deadline for lodgement of financial reports (see “Extended deadline for 30 June 2021 financial reports’)
ASIC has stated that it will continue to monitor how market conditions and COVID-19 related developments are affecting AGM obligations for balance dates after 7 July 2021 but there is currently no indication that further extensions of time will be necessary.
In addition and following the recent ASIC ‘no action’ position in relation to the convening and holding of virtual meetings (see our earlier Insight here for more details), the Australian Institute of Company Directors, in collaboration with the Governance Institute of Australia, the Australasian Investor Relations Association, and the Business Law Section of the Law Council of Australia have released a new guide to help organisations navigate the ongoing uncertainty around holding virtual and hybrid AGMs (and also executing electronic documents). The guide contains various tips for holding AGMs in the current environment, ranging from logistical considerations for hosting virtual AGMs to suggestions which will promote positive shareholder sentiment.
Consultation on greater transparency for proxy advice
Given the influential role of proxy advisers in Australian corporate governance and the high degree of institutional share ownership, Treasury has released a consultation paper (CP) seeking feedback on the adequacy of the current regulatory regime for proxy advice and developing reform options intended to strengthen the transparency and accountability of proxy advice. The consultation is open until 1 June 2021. The reform options are aimed at:
- ensuring independence between superannuation funds and proxy advice. The CP outlines the following options:
- requiring superannuation funds to disclose more detailed information in relation to their voting policies and actions (including whether any proxy advice was received, and from whom); and
- requiring proxy advisers to be meaningfully independent from a superannuation fund they are advising to ensue proxy advice is given on an ‘arm’s length’ basis.
- facilitating engagement between companies and proxy advisers. The CP outlines the following options:
- requiring proxy advisers to provide the report containing the research and voting recommendations for resolutions at a company’s meeting to the company before distributing the final report to investors; and
- requiring proxy advisers to notify their clients how to access the company’s response to the report (through a website link or other access instructions);
- requiring suitable licensing for the provision of proxy advice. The CP suggests a requirement for proxy advisers to obtain an Australian financial services licence for the provision of proxy advice.
CPS 234-like cyber security obligations: Is your company prepared?
The importance of Australian companies being “cyber-prepared” and “cyber-resilient” in order to protect themselves, their information assets and their customers against cyber risks is an area of increased focus and concern. The Australian Government has committed, as part of Australia’s Cyber Security Strategy 2020, to investing $1.67 billion over 10 years to create a safer, more secure online world for Australians.
- The Government has already proposed legislative amendments to increase the robustness of Australia’s privacy and cyber security framework, with regard to the Privacy Act 1988, the Security of Critical Infrastructure Act 2018 and the Voluntary IoT Code of Practice. Whether the government intends further regulatory reform is yet to be determined, however, a recent opinion piece in the Australian Financial Review has reported that:
- data security and risk experts have formed the view that reform will comprise significant amendments to the Corporations Act 2001 and directors’ duties with the introduction of obligations regarding cybersecurity; and
- the form of such amendments may obligate all Australian ASX 200 companies to implement information security measures similar to the requirements imposed on entities regulated by the Australian Prudential Regulation Authority under its CPS 234 Prudential Standard.
See our article: CPS 234-like cyber security obligations: Is your company prepared?
Directors’ duties to disclose climate-related financial risks
Growing pressure from both institutional and retail investors and increased scrutiny from regulators (for example, the recently established Task Force on Climate-Related Financial Disclosures) have required companies to think carefully about their climate-related risks. A recent G+T Insight, “Directors’ duties to disclose climate-related financial risks” considers the consequences of a failure to disclose climate-related financial risks in this new environment. In particular, the Insight reports that there is an emerging body of opinion that a failure to properly consider and disclose foreseeable climate-related risks may constitute a breach of a director’s duty of care, skill and diligence. The vulnerability of Australia’s natural environment, as demonstrated recently by bushfires and floods experienced across the country, therefore requires that directors place climate-related risks at the forefront of their risk management frameworks and upcoming disclosures in the company’s annual report.
It is also worth noting that since publication of the above Insight, the Centre for Policy Development has published a further supplementary memorandum of opinion by Noel Hutley SC and Sebastian Hartford Davis which builds on their 2016 and 2019 opinions on directors duties with regard to considering, disclosing and responding to climate-related risks. The latest opinion highlights the continually rising bar for directors, as well as the risk of liability for misleading or deceptive conduct for representations associated with “greenwashing” (in particular around net zero emissions commitments).
See our article: Directors’ duties to disclose climate-related financial risks.
Reforming casual employment
In late 2020, the Federal Government released the Fair Work Amendment (Supporting Australia’s Jobs’ and Economic Recovery) Bill. The Bill set out the most significant industrial relations reforms since the Fair Work Act 2009 (Cth) and the first attempt at workplace reform by the Coalition since the Howard Government’s Work Choices legislation in 2006.
Despite a lengthy consultative process with trade unions and employer representatives, the Federal Government abandoned most of the contentious elements of the Bill. The result is that only changes to the Fair Work Act 2009 (Cth) relating to casual employment were passed by Parliament and became law on 27 March 2021.
A recent G+T insight provides an overview of the changes to casuals and the protection they provide for employers from casuals claiming to be permanent employees.
See our article: @Work: Reforming Casual Employment.
Navigating Australia’s foreign investment regime
While Australia generally welcomes foreign investment, the Australian government screens certain foreign investment proposals on a case-by-case basis to determine whether a particular proposal is contrary to the national interest or, in certain circumstances, national security only. A recent guide by G+T partner Deborah Johns outline some of the rules governing the screening process.
See our article: Navigating Australia's Foreign Investment Regime.