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 regulatory updates including new laws that require mandatory and public reporting of JobKeeper payments for listed entities, and ASIC’s September Corporate Finance Update, which provided reminders relating to fundraising, prospectus information including net zero statements, mergers and acquisitions. We also consider the recently released report on gender representation in executive level positions. Meanwhile on the Risk Radar, is an ASIC reminder of the risks associated with leaks and mishandling information.
GOVERNANCE & REGULATION
ASIC publishes September Corporate Finance update. ASIC has this week published its Corporate Finance Update for September 2021, which provided insight on a number of items on which ASIC has focused, and will likely continue to focus. ASIC observed that the six months from January to June 2021 had seen a substantial uptick in M&A activity, with a total deal value of $30.29 billion compared to $11.02 billion from July to December 2020. Of particular note, ASIC shared details of its intervention with an energy company including “net zero” statements in its prospectus, noting that a net zero statement is a forward-looking statement, and where there are no reasonable grounds to underpin that statement, it may be misleading. In a time where there is a push for companies to communicate their net zero or other sustainability goals, Directors must balance this pressure against the potential for any such forward-looking statements to be misleading or deceptive to ensure investors are appropriately informed and ASIC intervention is not prompted. As noted in a previous edition of Boardroom Brief, Directors also need to be alert to the risk of shareholder litigation. ASIC also reminded listed entities and market participants of the risks associated with leaks, as discussed in further detail in our “Risk Radar” section below. Read ASIC’s media release.
Chief Executive Women Senior Executive Census confirms underrepresentation. The Chief Executive Women (CEW) Senior Executive Census for 2021 was released in early September. The CEW tracked the representation of women in executive leadership positions of ASX 300 companies over the past five years. The key findings from the census include that only one out of 23 CEO appointments in the ASX 300 in the 2021 reporting period was a woman and there are only 18 women CEOs in the ASX 300 (representing 6.2%). The survey results are a stark contrast to the news we recently reported that there were no all-male boards on the ASX 200. The CEW said the results are a wakeup call– particularly if the previously discussed 40:40:20 model is to be achievable in the near future. CEW notes that on the current trajectory, it will take 65 years (until 2086) until women make up 40% of line roles, which is an interesting observation against the AICD’s push for the 40:40:20 model on Boards. The CEW believes the results are a clear indication of the need to improve representation and remove institutionalised obstacles. Read the full report and CEW's statement.
New laws require mandatory public JobKeeper reporting for listed companies. From 1 October 2021, listed entities will be subject to new reporting requirements following Royal Assent of the Treasury Laws Amendment (2021 Measure No. 2) Bill 2021. Listed companies will now be required to produce a notice to their relevant market operator if they received a JobKeeper payment in a financial year. The notice must include the sum of all payments received by an entity and any of its subsidiaries, along with the number of employees the payments were claimed in relation to. The notice will also require entities to state whether any voluntary repayments to the Commonwealth have been made, and the amounts of such repayments. Once the notices have been received by market regulators, ASIC will publish the notice on its website. Details of the form of the notice are unknown at this stage, so we expect to see further developments.
ASIC Corporate Finance Update reminder of “leak” risks. As discussed above, in its September Corporate Finance Update, ASIC reminds listed entities and market participants to be vigilant in managing the risks associated with leaking or mishandling information. The risks of leaks have always been present, and front of mind for Directors. However, ASIC’s reminder is timely, particularly given the rise of cyber-related risks, which potentially increases both the likelihood of a leak and the magnitude of consequences following a leak. ASIC provides the following guidance for listed entities to minimise leaks in a control transaction. First, companies should require consultants and contractors to enter into confidentiality agreements. Second, companies should have appropriate arrangements in place to handle inside information, including on a “need to know” basis. Finally, record to whom and when inside information has been provided - an example of this is to watermark documentation provided in accordance to its particular recipient to assist with tracking any leak. Above all, companies should have in place a formal leak policy outlining clear steps to monitor and react to any leaks. These considerations and cautionary steps are becoming increasingly important as Directors are operating in an age where they may be personally liable for leaks via cyber-attack, and where ASIC may take action where it considers a company has failed to implement adequate cybersecurity measures.