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 discuss the ACCC’s proposed reforms to Australia’s merger approval regime, ASX’s announcement regarding a proposed wind down and closure of mFund, and the Treasury’s consultations on new regulations concerning financial reporting and auditing requirements of registrable superannuation entities. We also discuss the Takeovers Panel’s decision to decline to conduct proceedings in relation to Healius, as well as a Federal Court decision that found that an architectural firm and its managing director engaged in illegal cartel conduct by bid rigging.
In Over the Horizon, we discuss the results and recommendations emerging from the AICD’s quarterly Gender Diversity Progress Report, noting some key challenges to continued progress in female representation on boards.
GOVERNANCE & REGULATION
ACCC calls for significant reforms to Australia’s merger approval regime. On 12 April 2023, Chair of the Australian Competition and Consumer Commission (ACCC), Gina Cass-Gottlieb, delivered a speech to the National Press Club in support of reforms to Australia’s merger approval regime. Ms Cass-Gottlieb called for reforms to protect competition in Australia’s economy during a critical period of economic transition, stating the current regime does not adequately respond to an environment of uncertainty and vulnerability by encouraging “competitive, innovative and dynamic markets”. The ACCC proposes to introduce a mandatory and suspensory notification system requiring parties to notify the ACCC upon reaching certain thresholds and granting the ACCC “call in” powers to review acquisitions which fall below these thresholds. The ACCC also proposes changes to the substantive merger test, including expansion of the prohibition on mergers beyond those that “substantially lessen competition”, and an update to the factors relevant to assessing whether a merger is anticompetitive. A spokesperson for Commonwealth Treasurer, Jim Chalmers, stated that Mr Chalmers “will carefully consider the proposal”. See ACCC media release. See also full speech and G+T Knowledge article.
ASX to consult market participants on proposed wind down and closure of mFund. On 12 April 2023, Australian Securities Exchange Ltd (ASX) announced that it is planning to release a consultation paper in June 2023 regarding a proposed wind down and closure of the ASX Managed Fund Settlement Service (mFund). mFund was launched in 2014 to provide investors and financial advisors with a more efficient means of accessing unlisted managed funds. ASX noted that mFund has struggled to gain traction, attracting only $1.6 billion in funds under management across 232 funds. Conversely, ASX noted “increasing issuer and investor preference for exchange-traded funds” (ETFs), with ASX’s ETF market now having approximately $136 billion in funds under management across 283 funds. This significant disparity between mFund and ASX’s ETF market reflects the significant growth in ETFs, both domestically and overseas, with the Australian ETF market growing around 2600% in the past decade. ASX noted that it has not yet made a final decision on whether to wind down mFund and expects to seek feedback on matters including industry preferences for transacting in managed funds via ASX, and key considerations relevant to any winding down of mFund. See ASX media release.
Treasury seeks stakeholder views on proposed regulations concerning financial reporting and auditing requirements of registrable superannuation entities. On 11 April 2023, the Treasury released exposure draft regulations and an accompanying explanatory statement relating to legislation tabled in Parliament last year that seeks to make registrable superannuation entities (RSEs) subject to financial reporting and auditing requirements consistent with those that apply to public companies and registered schemes. The draft regulations “prescribe requirements for the preparation, lodgement, disclosure and publication of information and documents by RSEs to improve the compliance and transparency of the superannuation sector”. The Commonwealth Government is seeking stakeholder views on the implementation of the draft regulations. Submissions can be made up until 5 May 2023. Trustees and directors of RSEs should be alert to the significant reforms to reporting requirements set out in Schedule 6 of the Treasury Law Amendment (2022 Measures No.4) Act 2023 (Cth), which these regulations support. See Treasury webpage.
Takeovers Panel declines to conduct proceedings in relation to Healius. On 17 April 2023, the Takeovers Panel (Panel) announced that it has declined to conduct proceedings regarding an application from Healius Limited (Healius) in relation to Healius’ affairs. The application related to the contents of the bidder’s statement lodged in connection with Australian Clinical Labs Limited’s (ACL) ongoing off-market scrip takeover bid of Healius (see previous edition of Boardroom Brief). Following Healius’ application, ACL provided a draft replacement bidder’s statement (RBS) containing revised disclosure in various respects. After considering the RBS, the Panel requested further disclosure regarding “the impact of ACL acquiring less than 90% of Healius shares on certain expected cost synergies set out in the RBS”. ACL then provided an amended RBS, which the Panel was satisfied sufficiently addressed its concerns. The Panel was also satisfied that other requests made by Healius in its application could be adequately addressed in the company’s target’s statement. Accordingly, the Panel concluded that “there was no reasonable prospect that it would make a declaration of unacceptable circumstances” and declined to conduct proceedings. See Takeovers Panel media release.
Federal Court orders architecture firm and former managing director to pay penalties for attempting to engage in cartel conduct. On 13 April 2023, the Federal Court (Court) held that architecture firm Ashton Raggatt McDougall Pty Ltd (ARM) and its former managing director had attempted to rig bids for a tender relating to a $250 million building project at Charles Darwin University in Darwin. The ACCC commenced proceedings against the defendants in September 2022, alleging they had attempted to engage in illegal bid rigging. A bid rigging cartel occurs where two or more competitors agree not to genuinely compete against each other for tenders, manipulating the tender process to pre-determine who will “win” the tender. ACCC Chair, Gina Cass-Gottlieb, emphasised the illegality of bid rigging, stating that the judgment against ARM should “serve as a strong reminder for everyone … that bid rigging is against the law, no matter what industry you are in”. The Court ordered ARM and its former managing director to pay penalties of $900,000 and $75,000 respectively. The former managing director was also ordered to release an educative notice about his experience on the Architects Registration Board of Victoria as a warning to other professionals. Directors in all industries should be aware of this non-pecuniary order available to the Court, which publicises wrongdoing in a forum tailored to the wrongdoer. See ACCC media release.
OVER THE HORIZON
AICD Gender Diversity Report shows progress in the continuing drive towards gender parity. On 11 April 2023, the Australian Institute of Company Directors (AICD) released its quarterly Gender Diversity Progress Report (Report) which shows promising improvement for female representation on boards. The Report reveals that female board appointments increased this quarter, with women accounting for 36% of board members in the ASX200 and 35.5% in the ASX300. However, the Report notes a stark contrast between the number of women among non-executive directors (NEDs) (40.2% of roles in the ASX300 are held by women) compared to at the executive director level (88.9% of roles in the ASX300 are held by men). AICD Managing Director and CEO, Mark Rigotti, emphasised that the challenge is now for boards to “refocus their attention so we see similar progress can flow through to executive director appointments”. Directors are reminded of ASX Corporate Governance Recommendation 1.5 that listed entities should have and disclose a diversity policy and set “measurable objectives” for gender diversity. See AICD Report. See also AICD media release.