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 ASIC’s regulatory outlook and business plan, newly published guidance for the LIBOR transition, milestones for the Future Fund and ASX 200 board membership, proposed frameworks for Corporate Collective Investment Vehicles, and the sweeping reforms to mergers and acquisitions announced by competition regulator, the ACCC.
GOVERNANCE & REGULATION
Federal Government releases ASIC Statement of Expectations. On 26 August 2021, the Federal Government released a new Statement of Expectations for ASIC, which outlines the Government’s priorities and expectations of ASIC. The Statement emphasises the Government’s expectation that ASIC should contribute to the Government’s economic goals, including supporting the nation’s economic recovery from COVID-19 – which has been a key theme in recent ASIC updates. ASIC has provided the Federal Government with a Statement of Intent in response, outlining ASIC’s priorities to meet the Government’s expectations, including by identifying and pursuing ways to “maintain and improve the fair and efficient operation of capital markets and the corporate sector, to facilitate business investment and confident participation by investors in the financial system”. The Statement of Expectations and Statement of Intent, along with ASIC’s four-year corporate plan (as set out below) provide a clear view as to the path forward. See the Treasury’s media release and ASIC’s release.
ASIC releases Corporate Plan for 2021-2025. ASIC has released its four-year corporate plan detailing its key priorities and strategic objectives. Notable priorities outlined by ASIC include the promotion of economic recovery through targeted regulation aimed at the most harmful conduct, increased cyber-security readiness and awareness, and ensuring compliance with recent and impending law reforms. See ASIC’s media release. With the change in leadership at ASIC, we do expect a slight pivot away from the “why not litigate” mindset. However, as business conditions tend to normalise post-COVID-19, directors should expect regulatory and enforcement activity to increase.
ASIC releases guidance for LIBOR transition. ASIC has released a guidance note aimed at directors and corporate treasurers to assist in the transition away from the LIBOR interest rate by 31 December 2021, as noted in previous editions of Boardroom Brief. ASIC acknowledges the difficulty of entities to make such a transition and remain compliant with ongoing obligations. To assist with this transition, ASIC urges directors and corporate treasurers to conduct a LIBOR “stocktake” if this has not already been conducted – this should identify all areas of the company which are affected by LIBOR so that necessary action can be taken to address these terms. ASIC reminds that this stocktake exercise should not be confined to financial contracts and investment holdings. Directors should also consider whether LIBOR is used as discount rates in valuation and risk models, or if it is used in accounting methodologies and tax treatments.
AICD announces ASX 200 Boards’ gender milestone. Earlier in the month, there were two ASX 200 companies with all-male Boards. Last week, for the first time in history, the AICD reported that there were no all-male Boards of ASX 200 companies. The AICD notes that notwithstanding this landmark, it is important for all chairs to continue to prioritise diversity in the search for directors, and emphasises the 40:40:20 model for all companies – that is, 40% men, 40% women and 20% of any gender. See the AICD’s media release.
Consultation open for Corporate Collective Investment Vehicle frameworks. New laws propose the creation of a new Chapter of the Corporations Act 2001 (Cth) to facilitate the growth of Australia’s managed fund industry through a Corporate Collective Investment Vehicles (CCIVs) regime as foreshadowed in the 2021-22 Federal budget. CCIVs are investment vehicles with a corporate structure, with the additional consumer protection of an independent depositary for retail funds that is responsible for the oversight of certain administrative functions undertaken by the managed funds. The consultation publication concerns tax and regulatory matters that aim to bring the regime more closely in line with international markets, and builds on previous extensive public consultation on the proposed CCIV regime. Submissions are open until 24 September 2021. See the Treasury’s media release.
Federal Court confirms it has no jurisdiction to contradict ASIC review findings. The Federal Court last week, in its decision of Mineralogy Pty Ltd v Australian Securities and Investments Commission  FCA 996 set aside an application for it to declare that the applicant company’s accounts are a true and fair reflection of the company’s financial position and that it had complied with Ch 2M of the Corporations Act in proceedings commenced against ASIC. The accounts contained a statement by the company that an officer had acted honestly when making certain payments that are now the subject of an ongoing criminal prosecution resulting from an investigation conducted by ASIC. The orders confirm that Court has no jurisdiction to consider ASIC’s review findings where there is no genuine right, duty or liability attached to the proceeding.
OVER THE HORIZON
ACCC confirms proposed sweeping reforms to mergers and acquisitions process. ACCC chair Rod Simms outlined ACCC’s proposed reforms to Australia’s mergers and acquisitions regime in a speech on Friday. Mr Sims outlined four key focus areas, which he considers render the current regime inadequate. First, the requirement for the ACCC to commence proceedings to prove that anti-competitive effects of an acquisition are “likely” in order to prevent an anti-competitive acquisition. Second, there is insufficient focus on the structural conditions for competition. Third, the merger control regime is skewed towards clearance. Fourth, there is a gap in legislation in relation to acquisitions by digital platforms. These four key focus areas are expected to guide proposed reforms, which are led by the introduction of a mandatory pre-condition review regime if a yet-to-be-determined threshold is triggered by a proposed merger or acquisition. If these reforms are implemented, it may be reasonable to expect that ACCC clearance conditions precedent receive enhanced attention in negotiations, much akin to that currently attributed to the comparable FIRB process. See Mr Sims’ speech.