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 Treasury’s latest update regarding foreign investment obligations. We also consider an application to the Takeovers Panel in which a proposed scrip takeover bid is submitted to be impeded by the target conducting a rights issue, as well as a case from the Federal Court of Australia that clarifies the guidelines for determining different classes of shareholders in a scheme of arrangement. Finally, in this week’s edition of Risk Radar, we consider the ever-changing cyber landscape and some pertinent reminders for Directors’ duties. 


FIRB provides update to investors on compliance obligations. On 30 September 2021, Treasury published a new FIRB guidance note focussing on reinforcing the approach to compliance and enforcement. The note reinforces the expectation that investors are aware of, understand and comply with their obligations under the FIRB laws, and encourages investors to disclose instances of non-compliance, whilst noting the Treasury’s ability to employ monitoring and investigatory powers to uncover such instances otherwise. The note also provides a useful overview of investor obligations and Treasury’s approaches and procedures. See the Treasury’s investor reporting requirements for further details.


Takeovers Panel receives application in relation to a rights issue during an off-market takeover bid. The receipt of an unwelcome takeover proposal can place target company directors in a difficult position, particularly if bid conditions impose restrictions on the ability to raise capital or undertake other “business as usual” activities. A case in point, is the proposed off-market scrip takeover bid by Metalicity Limited for Nex Metals Explorations Ltd announced in September. Metalicity’s offer includes a standard defeating condition relating to any issue of shares by Nex Metals. After receipt of the Bidder’s Statement, Nex Metals announced a non-renounceable rights issue to raise up $3.1 million, closing 3 days before the earliest date Metalicity’s bid could close. Metalicity submits to the Panel that the rights issue frustrates and impedes the bid by not allowing Nex Metals’ shareholders an opportunity to choose between the rights issue and the bid. Metalicity has applied to the Takeovers Panel seeking an interim order preventing Nex Metals from making any offer under the rights issue and a final order to prevent Nex Metals from proceeding with the rights issue. No doubt Nex Metals will point to its need to raise working capital as justifying the rights issue.  See the Takeover Panel’s media release

Tax consequences insufficient to create separate shareholders’ class in scheme of arrangement. The  decision in Re Huon Aquaculture Group Ltd [2021] FCA 1170 in the Federal Court of Australia has clarified the parameters for determining classes of shareholders in relation to tax benefits borne from schemes of arrangement. The Court provided numerous observations to provide further guidance as to whether distinct tax consequences would indicate a distinct class of shareholders. First, the Court noted tax benefits arise under taxation laws, not as a benefit received merely in relation to voting under a scheme, and therefore are not rights affected by the scheme. Second, the Court also noted different tax consequences may create different commercial interests but are extrinsic to share membership, so their relevancy is diminished. Finally, the Court reiterated prior judicial reticence to approach shareholder class identification too broadly such that class diversity in schemes become unmanageable. “Class composition” rules are an important aspect of the integrity of the scheme process, and the decision serves as a reminder that while scheme companies should be cautious in considering “classes” of shareholders, those classes should not be defined too broadly.


The continuing economic, legal and social risks of cybersecurity for Directors. The diverse and constantly shifting landscape of cyber risk continues to pose difficult challenges for Directors. In fact, the Director Sentiment Index for the first half of 2021 identified cyber crime as the equal second issue that would keep Directors awake at night.  Following our earlier editions of risk radar encompassing cyber security and ASIC’s reminder of information leak risks, the impending regulatory response to the Government’s Strengthening Australia’s cyber security regulations and incentives consultation paper potentially raises new issues. In particular, following the paper, it is expected that directors’ duties in relation cybersecurity risks may be clarified as the Government seeks to introduce a bespoke framework for this particular issue. Directors of listed entities are also reminded of their continuous disclosure obligations which, subject to the relevant exceptions, require any security breaches be immediately reported if such breach could reasonably be expected to have a material effect on the value of the company’s securities. Proactive governance and risk management is made even more important in the context of Directors’ and companies’ liability for litigation risk and class actions where a ransom is paid in response to threats from malicious parties. See further detail about these cyber risks in G+T’s article Data breaches, continuous disclosure and class actions: unwelcome bedfellows.

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