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 first action by the Australian Securities and Investments Commission (ASIC) in relation to greenwashing and aspects of the Federal Budget relevant to Directors. Further, we look at ASIC’s proceedings against BPS Financial for conduct in relation to a crypto-asset token, and separate Takeovers Panel proceedings in relation to the affairs of Lincoln Minerals Limited and Nimrod Resources Limited.
In Over the Horizon, we discuss ASIC’s treatment of crypto-assets and other ‘unregulated’ financial products, and the expected focus on implementation at COP27.
GOVERNANCE & REGULATION
ASIC takes first action for ‘greenwashing’ by listed energy company Tlou Energy Limited. On 27 October 2022, ASIC announced that it received payment of $53,280 in relation to four infringement notices issued to Tlou Energy Limited (Tlou) for alleged false or misleading sustainability-related statements made to the Australian Securities Exchange in October 2021. The statements claimed that, among other things, electricity produced by Tlou would be carbon neutral, its gas-to-power project would be ‘low emissions’, and that it was equally concerned with producing ‘clean energy’ through the use of renewable sources as it was with developing its gas-to-power project. ASIC was concerned that the statements were factually incorrect, or that Tlou did not have a reasonable basis to make them. As noted in a previous edition of Boardroom Brief, ASIC Chair Joe Longo stated in March 2022 that improving ‘the standard of climate change governance practices’ is a core focus area for ASIC, and that ‘greenwashing is also very much in [ASIC’s] sights’. The action against Tlou highlights that this focus is beginning to translate into regulatory action. See ASIC media release.
Federal Government delivers 2022-2023 Budget. On 25 October 2022, Federal Treasurer Jim Chalmers delivered the 2022-2023 Commonwealth Government Budget –the first delivered by a federal Labor government in a decade. Relevantly for Directors, the Government has determined that it will not proceed with 2016-2017 Budget measures proposing a new tax and regulatory framework for limited partnership collective investment vehicles. It has also aligned the taxation treatment of off-market and on-market share buy-backs by listed public companies. As a result, no portion of the buy-back proceeds will be regarded as a dividend, meaning that no component will be eligible to be franked, and the revenue or capital loss made by shareholders will be determined by reference to the full proceeds of the buyback. See Budget website, Treasury media release, and G+T Knowledge article.
ASIC commences proceedings against BPS Financial for conduct in relation to crypto-asset token. On 25 October 2022, ASIC commenced proceedings in the Federal Court against BPS Financial Pty Ltd (BPS). ASIC alleges that BPS made false, misleading or deceptive representations and engaged in unlicensed conduct in relation to a non-cash payment facility involving Qoin, a crypto-asset token. ASIC stated that it was particularly concerned with representations that the Qoin facility is regulated in Australia since individuals and entities issued with the Qoin facility may have incorrectly believed that it was compliant with financial services laws. The first case management hearing is yet to be scheduled by the Federal Court. See ASIC media release.
Takeovers Panel receives application in relation to the affairs of Lincoln Minerals Limited. On 28 October 2022, the Takeovers Panel announced that it received an application from Olary Holdings Limited (Olary) in relation to the affairs of Lincoln Minerals Limited (Lincoln). Olary alleges that it was unacceptable for Lincoln to terminate an issue of convertible notes, and to convert the related outstanding debt into a shareholder loan. It further alleges that the effect of an entitlement offer, for which Lincoln intends to seek shareholder approval at its re-scheduled 2021 AGM, the proposed issue of shortfall shares to the underwriter and sub-underwriters, and inadequate disclosure in the notice of meeting for the 2021 AGM are all unacceptable circumstances. The President of the Panel declined to make an interim order delaying the 2021 AGM scheduled to be held on 31 October 2022. A sitting Panel has not been appointed at this stage and no decision has been made whether to conduct proceedings. See Takeovers Panel media release.
Takeovers Panel publishes reasons for declining to conduct proceedings in relation to the affairs of Nimrod Resources Limited. On 28 October 2022, the Takeovers Panel published its reasons for declining to conduct proceedings in relation to the affairs of Nimrod Resources Limited (Nimrod). As noted in a previous edition of Boardroom Brief, the Panel announced on 27 September 2022 that it received an application from Romell Pty Ltd (Romell) alleging that Goldtower Construction Pty Ltd ATF GTC Trust (Goldtower) invalidly increased its interest in Nimrod from 33% to 43.87% via participation in an entitlement offer without appointing a nominee in respect of foreign shareholders as required by section 615 of the Corporations Act. The Panel found that it was unclear whether the takeovers prohibition had been contravened in relation to a failure to extend an entitlement offer to shareholders in the United States, but in any event given such holders accounted for only 0.04% of shares on issue, any non-compliance with the relevant exception to the takeovers provision would be immaterial. Accordingly, the Panel declined to conduct proceedings as it did not consider that there was any reasonable prospect that it would make a declaration of unacceptable circumstances. See Takeovers Panel media release.
OVER THE HORIZON
ASIC moving to take ‘unregulated’ financial products seriously. ASIC identified the regulation of crypto-assets as one of the ‘core strategic projects’ accompanying its four external strategic priorities in its 2022-2026 Corporate Plan. Sarah Court, ASIC Deputy Chair, also recently stated that it is ‘crucially important that investors are provided with honest and accurate information’ in relation to crypto-assets since they are ‘highly volatile, inherently risky, and complex’. ASIC’s action against BPS, discussed above, is a clear indication that ASIC is beginning to seriously examine cryptocurrencies and other ‘unregulated’ financial products, and we expect the regulatory focus on this sector to increase in the coming months. However, the regulator must strike a careful balance between fostering innovation, upholding market integrity, and protecting consumers.
COP27 set to focus on implementation. This year’s United Nations Climate Change Conference, the 27th Conference of the Parties (COP 27), is set to be held from 7-18 November 2022 in Sharm El-Sheikh in Egypt. Egypt’s President, Abdel Fattah El-Sisi, has stated that COP27 will be an ‘opportunity to showcase unity against an existential threat that we can only overcome through concerted action and effective implementation’. There is an expectation that there will be a shift from negotiation to more concrete action at COP27, particularly in relation to developing countries and the African continent. See G+T Knowledge article and United Nations website.