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In our first edition for the year, we take a look at the key items from the back end of 2021 and new developments in January 2022, including ASIC’s “regtech” initiative and its key focus areas for CFOs and for financial reports for entities with a 31 December year end, the commencement of proxy advice reforms, the takeover battle for Virtus Health, and the key takeaways from the Takeovers Panel’s reasons for various decisions.     


ASIC’s regulatory technology initiative into poor market disclosure. On 21 January, ASIC announced that it will be working with five regulatory technology “regtech” entities for the Business Research and Innovation Initiative (BRII) Regtech Round.  The initiative was launched by the Department of Industry, Science, Energy and Resources and will assess the potential of regtech to identity, assess and rectify poor market disclosure by listed companies, including with respect to continuous disclosure requirements, financial reporting obligations and the prohibition against misleading or deceptive disclosure. ASIC Commissioner Cathie Armour says that the initiative “has the potential to transform ASIC’s ability to harness technology to reduce regulatory burden, while enhancing market integrity”. See ASIC’s media release

ASIC flags focus areas for 31 December year end reporting and key issues for CFOs in 2022.  ASIC has highlighted focus areas for the financial reporting of entities with a 31 December year end.  These areas include asset values, provisions, solvency and going concern assessments and disclosures in the financial report and Operating and Financial Review.  While these areas have been flagged in the context of entities with a 31 December year end, all directors should take note of these areas, which are likely to be the subject of particular ASIC attention for the remainder of the year, including when financial reporting season for entities with a 30 June year end rolls around.  See ASIC media release.  Additionally, ASIC Commissioner Cathie Armour on 6 December 2021 spoke at the Financial Review CFO Live Summit.  The Commissioner noted the top five issues she believes should be on every CFO’s agenda in 2022, including climate change disclosure, cyber resilience, continuity of trading, digital financial reports and a smooth LIBOR transition.  Again, while flagged for the attention of CFOs, these are areas which all directors should ensure they are familiar with, and comfortable discussing in the Boardroom.

Proxy advice reforms to take effect next week.  As discussed in a previous edition of Boardroom Brief, various reforms to the proxy advice industry are expected to come into effect over the coming months.  The first round of these reforms take effect next week on 7 February 2022.  These reforms extend the AFSL regime to cover a broader range of proxy adviser activities and require proxy advisers to be independent of their institutional clients.  The proposed reforms have attracted significant debate from parliamentarians and proxy advice firms alike, particularly given they are the product of Treasurer Josh Frydenberg’s delegated regulations rather than legislation.  The key aspect of next week’s reforms seek to ensure greater transparency by requiring proxy advisers to provide a copy of their recommendations to companies on the same day those recommendations are provided to investors.


Takeovers Panel releases reasons for decision regarding WAM Capital Limited’s application in relation to the affairs of PM Capital Asian Opportunities Fund Limited.  The Takeovers Panel has released its reasons for its decision in relation to PM Capital Asian Opportunities Fund Limited (PAF) in PM Capital Asian Opportunities Fund Limited 01 [2021] ATP 17. PAF and PM Capital Global Opportunities Fund Limited (PGF) are each listed investment companies managed by PM Capital Limited (PMC).  In September 2021, PGF proposed to acquire PAF by way of scheme of arrangement.  At this time, the same three individuals comprised the board of each PGF and PAF.  Shortly before the Scheme Implementation Deed was executed, the companies each adopted governance protocols which provided for (amongst other things) (1) the engagement of a consultant appointed as a director of PAF only and (2) for PGF to give a direction with the effect of removing any control of PMC over the voting or disposal of securities held by PGF in PAF, with a view to dividing the voting power of PGF and PMC and associates in PAF.  The Panel was unconvinced, considering that the extensive overlap in the Boards of PGF, PAF and PMC combined with the delayed adoption of the governance protocols gave rise to a reasonable inference that the parties were “associated” for the purposes of the takeovers provisions.  The Panel made various orders which sought to unwind the effect of resulting breaches of the “3% creep” rule. The decision provides a useful outline of the factors which the Panel will take into account when considering whether an association exists.  See the Takeovers Panel’s media release.

Takeovers Panel declines to conduct proceedings in relation to the affairs of Nex Metals. The Panel has received another application from Nex Metals Explorations Ltd (Nex Metals) in relation to its own affairs.  The application sought review of the initial Panel’s decision to decline to conduct proceedings in Nex Metals Explorations Ltd 03 [2021] ATP 14. See a previous edition of Boardroom Brief of details of the Panel’s decision - essentially, the Panel concluded there was a lack of evidence to substantiate Nex Metals’ claims that the making of a takeover bid amounted to unacceptable circumstances.  In this instance, the Panel commented that although it is not bound by the rules of evidence, it is expected that applicants put forward probative evidence and not mere assertions when making allegations of serious contraventions.  The Panel again declined to conduct proceedings in this review application.  See the Takeovers Panel’s media release.  

Takeover battle for Virtus Health provides test case for scope of exclusivity arrangements. In mid-January, European private equity firm, CapVest made a $439 million bid for Virtus Health Ltd (Virtus), beating out the previous bid from local private equity firm, BGH Capital.  Notably, Virtus granted CapVest a 15-day exclusive due diligence period.  While seemingly at odds with a competitive bid process, the Virtus Board has defended this position, noting the exclusivity provisions (amongst other key terms) were required for CapVest to proceed with its bid, which it considered to be in the best interests of Virtus shareholders.  Usually, exclusivity provisions would include a “fiduciary out” which would permit the target Board to consider superior proposals where required to do so in accordance with their fiduciary duties.  Virtus’ announcement of the terms of the CapVest proposal, including the exclusivity arrangements, comes only a month after the Takeovers Panel’s decision in relation to the affairs of AusNet Services Limited (in that instance, an eight-week exclusivity arrangement without a fiduciary out was held by the Panel to be unacceptable). 


A look into the crystal ball for 2022.  As the new year commences, who can resist the temptation to make a few predictions? We think this year has the capacity to surprise in the legal, political and regulatory spaces, and will keep Corporate Australia on its toes.  Expect the focus on ESG issues to begin to wane in favour of more prosaic concerns, including inflation, the effect of rising interest rates and the need to shore up supply lines in the face of ongoing, COVID-induced personnel shortages.  Regulators, too, will need to pay more attention to companies’ ESG-related claims, the content and measurement of which is largely unregulated.  Geopolitical tensions may also cause some to question whether the “Greening of the West” has left advanced economies vulnerable to extraneous shocks (albeit, despite sabre-rattling in Eastern Europe and our own neighbourhood, it seems unlikely anyone has either the stamina or the funding for a “hot” war).  However, we expect the decarbonisation thematic to remain firmly in place throughout 2022 (and indeed the decade) as the global manufacturing complex retools to operate in a lower carbon environment.  We expect a confluence of factors in this area to force a serious re-think of the role of nuclear energy in the post-fossil fuel world: the only realistic prospect of achieving Paris Accord targets without impoverishing large swathes of the developing world. This will require bravery and co-operation between West and East in areas such as technology transfer and nuclear non-proliferation.  

Closer to home, the impact of the “Fortress Australia” border policy during the pandemic will truly begin to bite.  One of the reasons most Australians don’t understand the role of immigration policy in economic development is that migrant jobs are often “hidden” from view – in low-paid, behind-the-scenes roles in areas such as agriculture, manufacturing, retail, aged care and service industries, the criticality of which it took a pandemic to reveal.  Expect a spirited debate during the Federal election of the need to “turbo-charge” skilled and unskilled migration to get the economy moving again.  Higher interest rates will also force debt (public and private) into the public mindset: at some point, expect the political debate to switch from tax cuts to tax increases.  We also expect the sustainability of public spending on aged and disability care to come into focus in 2022: as a nation, we need to have an urgent and honest discussion about the spiralling cost of NDIS, in particular.  All this is likely to be set against the backdrop of increased volatility in global equity markets, exacerbated by what will almost certainly be cryptocurrencies’ day of reckoning.  Everyone is an expert in this area of course (except us), but an almost completely unregulated US$2 trillion market surely poses some serious risks to global stability, and a regulatory response, led by the US (which will be keen to reign in exuberance without killing a potentially golden goose) seems inevitable.  

In short: hold on to your hats, 2022 is going to be a doozy. 

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