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 provide an update on ASIC’s extension of the relief to companies to hold virtual meetings, the Federal Court’s approval of ASIC’s fine for breach of ongoing reporting obligations, and the applications received and determined by the Takeovers Panel within the past week. In Over the Horizon, we note the impact of both formal and informal financial sanctions on Russia, driven by both Government mandate and ESG concerns.
GOVERNANCE & REGULATION
ASIC grants relief for additional time to hold virtual-only meetings. In a previous edition of Boardroom Brief, we considered the reforms to the Corporations Act 2001 (Cth) (Corporations Act) which allow companies to hold hybrid or virtual meetings in certain circumstances until 1 April 2022. Last week, ASIC announced it was extending the timeframe for certain companies to hold virtual-only meetings - until 31 May 2022 for listed companies and until 30 June 2022 for unlisted companies. To rely on this extension, directors must resolve that it would be unreasonable for the company to hold a meeting wholly or partially at one or more physical venues, due to the impact of the pandemic. See ASIC’s media release.
ASIC Chair identifies key areas of focus for 2022. During his address at the AICD Australian Governance Summit, Chair Joe Longo identified several priorities for ASIC. With financial scams having risen from 15% to 35% of misconduct reports made to ASIC over the past three years, ASIC will be prioritising collaboration with other interested parties to combat such scams, minimise misleading and deceptive conduct, and protect financially vulnerable consumers impacted by predatory lending practices. ASIC will also be prioritising corporate governance issues such as those relating to non-financial risk, cyber governance and resilience failures, and egregious governance failures or misconduct resulting in corporate collapse. ASIC is also focused on improvement in the standard of climate change governance practices including considering climate-change disclosure for listed companies, preventing greenwashing, and ensuring that companies have adequate whistleblower protection policies. See the full speech.
Takeovers Panel receives further application in relation to Virtus Health Limited. In a previous edition of Boardroom Brief, we considered the Panel’s decision in relation to BGH Capital Fund I’s (BGH) application in relation to exclusivity arrangements arising from CapVest Partners LLP’s (CapVest) takeover bid for Virtus Health Limited (Virtus). Between the two applications, BGH made a revised takeover proposal for 100% of the Virtus shares at $7.65 per share and CapVest made a competing revised proposal for 100% of the Virtus shares at $7.80 per share, or for at least 50.1% of the Virtus shares at $7.70 per share. Last week, BGH made a new application to the Panel, submitting that Virtus has not taken steps to facilitate a genuine auction process between BGH and CapVest given there was “no material communication” from Virtus to BGH between receipt of BGH’s revised proposal and CapVest’s revised proposal. BGH seeks interim orders to extend the existing standstill preventing Virtus and CapVest from entering into a scheme implementation agreement and preventing CapVest from making a takeover bid for Virtus. BGH also seeks final orders including, amongst other things, that orders be made to the effect that Virtus must grant BGH due diligence access to, and engage with, BGH in good faith in respect of its revised proposal. See the Takeovers Panel’s media release.
Federal Court orders Rio Tinto to pay $750,000 fine for breach of ongoing disclosure requirements. After almost 10 years, the Federal Court of Australia yesterday approved the $750,000 settlement of ASIC’s case against Rio Tinto over allegations of misleading and deceptive conduct over the accounting treatment of, and delayed disclosure relating to, Rio Tinto’s Mozambique coal assets in 2012 and 2013. Between 2012 and 2013, Rio Tinto became aware that the Mozambique assets were not as prospective as originally represented but did not disclose this information for a period of 27 days between 21 December 2012 and 17 January 2013. The settlement comes after ASIC last week dropped all but one of its cases against Rio Tinto – a clear shift away from its previous “why not litigate” stance. Proceedings against Rio Tinto’s CEO and CFO were also dismissed with no order as to costs. See the Federal Court’s judgement and ASIC’s media release.
Takeovers Panel receives application in relation to the affairs of Bullseye Mining Limited. Hongkong Xinhe International Investment Company Limited (Xinhe) has made an application to the Takeovers Panel in relation to the affairs of Bullseye Mining Limited (Bullseye) who is currently the subject of takeover bids by Emerald Resources NL (Emerald) and Au Xingao Investment Pty Ltd (Xingao). Xinhe submits that there are disclosure deficiencies on the parts of Bullseye and Emerald in supplementary bidders and targets statements provided as a result of previous orders by the Takeovers Panel, namely that those statements do not disclose the date on which withdrawal rights under the Emerald bid expire and do not disclose the risk of the Emerald bid closing with Emerald having a relevant interest in less than 50% of the Bullseye shares as a result of shareholders exercising the withdrawal right. In the application, Xianhe argues that these deficiencies prevent Bullseye shareholders from coming to an informed decision in relation to the Xingao bid and whether to exercise withdrawal rights under, or accept, Emerald’s competing bid. Xinhe also submits that Bullseye’s failure to provide both bidders with equal due diligence access deprived Bullseye shareholders of the opportunity to receive a materially higher cash offer for their shares. Xinhe seeks interim orders extending the date for expiry of the withdrawal rights under the Emerald bid and requiring Emerald not to process any acceptances prior to the application being determined. See the Takeovers Panel’s media release. Bullseye has since provided an Undertaking to the Panel to the effect that it will not partake in the issue of Emerald shares to accepting Bullseye shareholders or take action to nominate directors to the board of Bullseye, without the Panel’s consent until the determination of the Panel proceedings. See the undertaking.
OVER THE HORIZON
The great Russian divestment continues. In last week’s edition of Boardroom Brief, we warned Directors of the potential impacts flowing from imposition of various Russian sanctions and the increasing isolation of Russia from global trade flows. The extent and effects of those sanctions (on a formal and informal level, and on a global and domestic scale) have grown exponentially in the past week: we now see the Federal Government, through Treasurer Josh Frydenberg, encouraging Australian superannuation funds to divest Russian investments. A shift in this direction was likely regardless of the positions adopted by Western governments, including Australia’s, given the growing importance of environmental, social and governance (ESG) considerations among the global investor community. As the Ukrainian conflict continues, it is reasonable to expect that other superannuation funds, large institutions and corporates will divest more and more of their Russian assets and investments.