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It has been a busy week for the corporate regulator. In this edition, we discuss ASIC’s landmark enforcement action for alleged greenwashing and breaches of whistleblower provisions, its recent guidance on handling whistleblower disclosures, and comments by ASIC Chair Joe Longo on the practical implications of directors’ duties.  We also note the approval of the first SPAC acquisition of an Australian company by a scheme of arrangement, despite a negative view from the independent expert and opposition from ASIC.

In Over the Horizon, we look at the proposed changes to tax treatment of large superannuation accounts.


ASIC commences first Court proceedings for alleged greenwashing.  On 28 February 2023, the Australia Securities and Investments Commission (ASIC) announced that it had launched its first court action for alleged greenwashing. The corporate regulator commenced civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited (Mercer).  ASIC alleges that Mercer made misleading statements on its website about the sustainable nature and characteristics of some of its superannuation investment options. The “Sustainable Plus” investment options, which excluded investments in companies involved in carbon intensive fossil fuels, alcohol production and gambling, were offered by the Mercer Super Trust as suitable for members who “are deeply committed to sustainability”.  ASIC alleges that its investigations have revealed that the Sustainable Plus funds held 15 stocks from companies involved in carbon intensive fossil fuels and 34 stocks across the alcohol and gambling sectors. ASIC Deputy Chair Sarah Court stated that this action “reflects [ASIC’s] continuing efforts to ensure sustainability-related claims made by financial institutions are accurate”.  The date for the first case management hearing is yet to be scheduled.  See ASIC media release. See also G+T Knowledge Article.

ASIC commences Court proceedings for alleged breaches of whistleblower provisions.  On 1 March 2023, ASIC commenced legal proceedings against TerraCom Limited (Terracom) and several of its directors and officers for allegedly breaching the whistleblower provisions in the Corporations Act 2001 (Cth). The action is in response to allegations made by a former employee regarding falsified coal quality results. TerraCom denied the allegations in two announcements to the ASX on 14 February 2020 and 3 April 2020, as well as in an open letter to shareholders published in the Australian Financial Review and The Australian on 12 March 2020, claiming that the allegations had been independently investigated. ASIC alleges that TerraCom and its directors and officers allowed false or misleading statements to be published to the ASX, resulting in harm to the whistleblower's reputation and emotional state. The regulator also alleges that they failed to take reasonable steps to address the issues raised by the whistleblower, in breach of their duty of care and skill.   ASIC Deputy Chair Sarah Court stated “[w]histleblowers perform a vital role in identifying and calling out corporate misconduct” and “[ASIC] take[s] any indication that companies are engaging in conduct that harms or deters whistleblowers very seriously”.  See ASIC media release.

ASIC publishes report providing guidance on handling whistleblowing disclosures.  On 2 March 2023, ASIC published Report 758 Good practices for handling whistleblower disclosures (REP 758) which sets out good practices to help entities improve their arrangements for handling whistleblower disclosures.  These practices were observed by ASIC in its review of seven entities’ whistleblower programs from a cross-section of industries.  ASIC Commissioner Danielle Press stated REP 758 “reiterates the important role that whistleblower programs play in alerting entities and board to changes necessary to help improve overall corporate performance and governance”.  ASIC “strongly encourages” companies to adopt the good practices identified in the REP 758 in a scaled and tailored manner to suit their operations.  Companies are also reminded of the obligation to handle whistleblower disclosures confidentially and to protect whistleblowers from adverse consequences.  See ASIC media release.

ASIC Chair highlights practical implications of directors’ duties.  On 2 March 2023, ASIC Chair Joe Longo delivered a speech at the Australian Institute of Company Directors’ Australian Governance Summit. He emphasized the practical implications of directors' duties and outlined ASIC's expectations of them. Mr Longo acknowledged that the expectations of directors will vary depending on the company, but emphasized some fundamental principles contained in certain questions: (a) Do I understand the business of the company of which I am a Director?; (b) Do I have a continuous curiosity in understanding all aspects of the company’s core business, including the reasonably foreseeable financial and non-financial risks posed by that business?; (c) Am I committed to challenging management to ensure my understanding is well-founded?. Mr Longo also recommended that directors should allocate resources, establish compliance systems and processes, and ensure the right people are in place to comply with legal and regulatory obligations. In addition, he acknowledged that balancing risks against benefits is crucial, but warned that boards must be active in understanding the risks and considering how to address them.  See ASIC media release.


First Australian SPAC scheme approved despite independent expert’s unfavourable conclusion.  On 28 February 2023, Justice O’Callaghan of the Federal Court of Australia approved two schemes of arrangement (a share scheme and an option scheme) effecting the merger of Security Matters Limited (ASX:SMX) (SMX) with Lionheart III Corporation (Lionheart), a NASDAQ-listed Delaware incorporated special purpose acquisition company (SPAC).  The effect of the schemes is that SMX and its business will be owned by Lionheart, and SMX’s current shareholders and option holders will be shareholders in Lionheart.  Interestingly, the independent expert ultimately concluded that the schemes were not fair, not reasonable, and not in the best interests of scheme security holders.  ASIC also opposed the schemes on the basis that this was the first SPAC scheme process in Australia, and neither ASIC nor the parties could point to any authority where a scheme was approved where the independent expert reached these conclusions.  The schemes were approved on the basis that the requirements in of the Corporations Act and the Corporations Regulations 2001 (Cth) had been met, and security holders overwhelmingly approved the schemes in circumstances where they had sufficient information regarding the schemes, including the independent expert’s conclusion, and sufficient time to consider this information.  See Re Security Matters Limited (No 3) [2023] FCA 140.


Superannuation Shake-up: What the Future Holds for Australia's Wealthiest Investors. On 1 March 2023, Commonwealth Treasurer Jim Chalmers announced a proposed increase in the tax rate on some of the nation's largest superannuation accounts from 15 per cent to 30 per cent.  The new rate (which will not take effect until 2025) would apply to accounts over $3 million and would impact 80,000 people and generate $2 billion in additional tax revenue annually.  The move has triggered the predictable response from the superannuation industry and opposition parties, who have accused the Albanese Government of a “super-sized” election promise breach. However Dr Chalmers has defended the change, and while acknowledging it may cost the government at the polls, considers it is the responsible thing to place the superannuation system on a more “sustainable” path and address the nation's ballooning public debt.

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