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 examine recent developments in gender equality on ASX boards, amendments to Victoria’s environmental law regime, Treasury consultation on employee share schemes and foreign investment reforms, and the Takeovers Panel’s reasons for its decision to decline to make a declaration of unacceptable circumstances in the Sementis case. 

This week’s Over the Horizon discusses the Federal Government’s recently updated four phase re-opening plan in response to COVID-19.

GOVERNANCE & REGULATION    

New report reveals that Australia is one of three countries to voluntarily reach 30% women on boards. An independent report by the University of Queensland, the Australian Gender Equality Agency and the Australian Institute of Company Directors (AICD) identifies Australia as one of three countries to have reached 30% female representation on boards voluntarily. As highlighted by the AICD, the report identifies numerous contributors to this result, including data, research and reporting, including “naming and shaming” and media as an advocacy platform, quota versus targets debate, the impact of the ASX Corporate Governance Council Recommendations and campaigning by institutional investors and superannuation funds. This report not only serves as a reminder to Boards of growing stakeholder expectations for appropriate female representation on Boards, but also emphasises the flexibility and responsiveness of modern Australian corporate governance structures.  

IOSCO consults on ESG ratings. The Board of the International Organization of Securities Commission (IOSCO) has released a consultation report seeking feedback on a set of proposed recommendations regarding environmental, social and governance (ESG) ratings and data providers.  The report notes that the market for ESG ratings and data has grown considerably over the past few years as a result of a lack of consistent disclosure standards coupled with the increasing interests of investors and stakeholders in the ESG characteristics of potential investments.  Notwithstanding their growing importance in this area, ESG ratings and data providers are not currently regulated by the various securities regulators – therefore prompting the IOSCO’s consultation.  The IOSCO is seeking comments on its consultation paper until 6 September 2021.  See the IOSCO’s media release.

LEGAL

Amendments to Victorian environmental law regime. On 1 July 2021, amendments to the Environment Protection Act 2018 (VIC) (Act) came into force.  The reforms require persons with “management or control” of land to notify and manage contaminated land, and imposes a “general environmental duty” to minimise risks of harm to health and the environment.  As set out in G+T’s article on these reforms, while it is expected the Victorian Environmental Protection Authority will adopt a pragmatic approach to enforcement, it may apply a higher standard against (1) companies that operate in industry sectors with known contaminated land issues; or (2) large entities with significant management systems and resources which would allow them to obtain legal or technical advice to inform themselves of their duties.  Companies with management or control of land in Victoria should ensure it has systems and processes in place to identify any (actual or potential) contaminated land over which they have management or control and assess the risk of contamination to determine whether the duty to notify has been triggered. See EPA Victoria’s webinar on the changes here.

Treasury consults on employee share scheme draft legislation. Treasury has released exposure draft legislation and announced consultation to give effect to the changes to regulatory and tax arrangements for employee share schemes (ESS) announced in the 2021-22 Budget.  The regulatory changes include removing Corporations Act requirements for ESS offers to employees who do not pay or incur debt to participate in those schemes, increasing the value cap under which the Corporations Act requirements do not apply to $30,000 for all other ESS offers by unlisted entities and expanding relief for unlisted entities to include contribution plans and limited or no recourse loans to allow employees to make monetary contributions to acquire eligible financial products.  Directors of start-ups and other viable, but “cash poor”, businesses should note that potential of these reforms to allow such companies to be more competitive in recruitment.  Responses to the consultation are due on 25 August 2021. See the Treasury’s consultation page.

Treasury consults on 2021 foreign investment reforms. In accordance with the Foreign Investment Reform (Protecting Australia’s National Security) Act 2020, the Treasury is conducting an evaluation of the operation of the foreign investment reforms which commenced on 1 January 2021.  While stakeholders can make general comments on the reforms (or any element of the reforms), the consultation paper sets out key areas for potential comment. The paper notes that the reforms updated the framework in three broad ways: addressing national security risks; strengthening the existing foreign investment system; and streamlining investment in non-sensitive business areas. This evaluation period, including the assessment of stakeholder comments, will be important in determining whether the right balance has been struck between welcoming foreign investment and protecting Australia’s national interests. Submissions must be lodged by 31 August 2021. See the Treasury’s consultation page.

Takeovers Panel publishes reasons for decision to decline to make a declaration of unacceptable circumstances.  In a previous edition of Boardroom Brief, we noted that the Takeovers Panel declined to make a declaration of unacceptable circumstances in response to an application in relation to the affairs of Sementis Limited (Sementis).  The application concerned an entitlement offer being undertaken by Sementis in circumstances where Fortitude Nominees (an entity controlled by a Sementis director) could potentially increase its voting power in Sementis from approximately 47.55% to a maximum of 59.3%. The Panel noted that it was reasonable for Sementis, as an unlisted entity operating in a capital intensive industry, to seek to raise sufficient funds to provide a reasonable “cash runway” to meet its disclosed business objectives. 

OVER THE HORIZON

On Friday, Prime Minister Scott Morrison announced that the National Cabinet had reached in-principle agreement on an updated four-step National Plan to transition Australia’s National COVID-19 Response (National Plan). The National Plan steps out the way forward following Phase A (the current phase). Phase B is set to occur when approximately 70% of adults are fully vaccinated (which the Government anticipates being reached by the end of the calendar year) with measures including ongoing low-level restrictions and effective track and trace. Phase C, the ‘Vaccination Consolidation Phase’, is set to occur when approximately 80% of the adult population is vaccinated and will include – most notably - the gradual lifting of outbound travel restrictions for vaccinated Australians and the extension of travel bubbles.  While most commentators have welcomed the publication of the National Plan, the targeted vaccination rates are much higher than those achieved overseas, with the exception of Israel and the United Kingdom – neither of which suffer from the complications that Australia’s Federal structure present.  Even over the weekend, there was evidence of the “in principle” agreement beginning to fray, with the Western Australian Government seemingly reserving the right to go its own way if circumstances require.  Progress towards pre-COVID life seems likely to remain stop-start for the remainder of 2021.