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 time for directors to apply for director identification numbers, the receipt and rejection of a Takeovers Panel application concerning an anti-competitive takeover bid and revised Guidance Note 20 on equity derivatives. Finally, in this week’s edition of Risk Radar, we consider a journal article which canvasses a modern Director’s struggle between shareholders and stakeholders in the context of Directors’ duties.
GOVERNANCE & REGULATION
Extension of time for Directors to apply for Director identification numbers. On 5 October 2021, the Commonwealth Government registered the Corporations (Director Identification Numbers - Transitional Application Period) Instrument 2021 (Instrument). The Instrument extends the time for eligible officers, including Directors, to apply for a Director identification number (DIN). Officers of companies registered pursuant to the Corporations Act 2001 (Cth) now have until 20 November 2022 to apply for a DIN. The purpose of the DIN regime is to allow the regulators to track Directors of failed companies with the purpose of curbing “phoenixing” practices. Phoenixing occurs when a company deliberately evades paying its debts by shutting down and shifting its assets to another company.
Takeovers Panels declines application concerning anti-competitive takeover bid of AusNet. The Panel received an application from Brookfield in relation to competing proposals made by APA and Brookfield for control of AusNet. This follows APA’s application made 23 September 2021 as discussed in a previous edition of Boardroom Brief. After APA’s application was made, APA made two announcements to the ASX explaining the competing proposal by APA and depicting the proposal as “superior”: an assertion that was contested by Brookfield, who took action before the Panel contending the announcements contained incorrect and misleading information which undermines the efficient, competitive and informed market principle. See Takeover Panel’s media release. The Panel declined to conduct proceedings in relation to this application on the basis that there was no reasonable prospect that it would made a declaration of unacceptable circumstances in relation to the matters raised in the application. The Panel will publish reasons in due course. See Takeover Panel’s media release. The Panel’s approach is typical of its reticence to become involved in disclosure disputes where the matter at heart relates to the depiction of the relative merits of competing proposals.
Guidance Note 20: Equity derivatives. On 4 October 2021, a revised version of Takeovers Panel Guidance Note 20: Equity Derivatives (GN 20) came into effect. GN 20 requires that market participants disclosure equity derivative positions if the long position of a person and their associates is 5% or more than the voting rights of an entity and/ or changes by at least 1% or falls below 5% of the voting rights of an entity. Derivatives have historically been used in a number of takeover contexts to accumulate an economic position in the target without the full glare of publicity. The Panel’s rules essentially treat the economic power conferred by derivative arrangements as akin to “voting power” within the meaning of the takeovers provisions of the Corporations Act 2001 (Cth). However, Directors should be aware of the heightened scrutiny of the use of derivatives outside of the takeovers context, and that any disclosure lapses may give rise to unacceptable circumstances, regardless of whether a control transaction has commenced.
Director’s Duties Conundrum. The Company and Securities Law Journal published an article entitled ‘A Civil Law Solution to the Social License to Operate and Director’s Duties Conundrum in Australia’. The article canvasses the modern director’s struggle between shareholder and stakeholder engagement in the context of the evolving interpretation of section 181(1)(a) of the Corporations Act 2001 (Cth) and proposes a solution in line with recent French legislative reforms. See G+T’s analysis of “Net zero commitments”: the latest minefield for directors which captures the conundrum directors face between balancing their duties and maintaining a social license to operate in the context of “net zero commitments” and the associated legal risks of publishing such commitments.