In this edition of Gilbert + Tobin's Corporate Advisory Update, we focus on key legal developments over the last month which are particularly relevant to in-house counsel.
Electronic signing and virtual meetings relief extended until 31 March 2022 and continuous disclosure reforms now in effect
The Treasury Laws Amendment (2021 Measures No. 1) Act 2021 (Act) (which was originally introduced in February) passed Parliament on 10 August 2021 and received Royal Assent on 13 August 2021.
Electronic execution and virtual meetings
The Act provides the following COVID-19 related changes so that:
- Corporations can execute documents under section 127 of the Corporations Act by split or electronic execution and can also remotely witness the fixing of a company seal for the purposes of execution under section 127. For more details, see our Insight - Back to the future; Electronic and split execution under section 127 of the Corporations Act permitted once again.
- In relation to meetings of companies and registered schemes:
- virtual meetings are permitted (whether or not contemplated by the company’s constitution and provided the members as a whole have a reasonable opportunity to participate);
- notices of meeting may be sent electronically or by sending by post an electronic address at which the notice can be accessed, to members who haven’t opted to receive hard copy communications; and
- minutes may be kept electronically.
In addition, ASIC now has new permanent emergency powers to issue short-term class and individual relief to allow virtual meetings, the provision of documents electronically and extending the time for holding an AGM in exceptional circumstances (i.e. circumstances beyond their control such as the effects of COVID-19). In practice, these emergency powers will not be exercised while the temporary relief is in force allowing all companies and registered schemes to hold wholly virtual meetings even in the absence of ASIC’s exercise of its emergency power.
Unfortunately, these changes (except ASIC’s new emergency powers) are not yet permanent and will expire on 31 March 2022. However, Treasury is currently finalising the permanent reforms, with a view to them being in place before 31 March 2022.
Continuous disclosure reforms
The Act also introduces reforms to Australia’s continuous disclosure regime to limit liability to circumstances where companies, directors or officers can be shown to have actual knowledge that the company’s disclosure is incorrect or where they act recklessly or negligently (with the reforms subject to an independent expert review of the operations of the reforms within 6 months of the second anniversary of commencement). For more details, see our Insight – Softer continuous disclosure test to become law.
Public M&A in Australia: 2021 half year update
G+T has published its Public M&A in Australia: 2021 half year update, noting that the market for mergers and acquisitions in this period has been supercharged, with almost $150 billion of public and private deals being announced in Australia and New Zealand (including $6.72 billion in binding deals involving ASX-listed targets). The key trends set out in this article reassure that notwithstanding the pandemic and geopolitical tensions, M&A confidence is high. The ingredients for successful M&A experienced in the first half of 2021 should also continue into the second half of the calendar year – with low interest rates and pension and super fund money providing the much needed capital, ESG and shareholder activism pushing M&A and companies seeking to position themselves to take advantage of the changing world on a technological and energy basis. As the Delta variant continues to impact countries around the globe, it is also reasonable to expect that bidders will continue to take advantage of targets whose businesses are struggling through COVID-19.
Climate litigation around the world and potential risks for corporate Australia
Recent judicial decisions in Australia and abroad have demonstrated that individuals are more prepared to take on the big players in respect of their carbon emissions; equally, Courts have been prepared to find that duties can be owed to individuals in respect of the carbon emissions produced from existing operations and proposed projects.
In the face of society’s evolving environmental conscience and the development in judicial attitudes, companies ought to carefully reflect on their emissions and reduction targets. Otherwise they may find themselves defending climate change litigation that might previously have seemed novel, but may well become more common in the not too distant future.
A recent G+T Insight considers the state of climate litigation in Australia and overseas, and the ramifications which may arise for company directors and senior management as a result.
Consultation on employee share scheme reforms
Treasury has released exposure draft legislation and announced consultation to give effect to the changes to regulatory and tax arrangements for employee share schemes (ESS) announced in the 2021-22 Budget plus the regulatory reforms previously consulted on in April 2019. Consultation closes on 25 August 2021.
The changes proposed in the exposure draft legislation:
- remove Corporations Act requirements for ESS offers to employees who do not pay or incur debt to participate in those schemes;
- increase the value cap to $30,000 in respect of which the Corporations Act requirements do not apply for all other ESS offers by unlisted entities;
- expand relief for unlisted entities to include contribution plans and limited or no recourse loans to allow employees to make monetary contributions to acquire eligible financial products;
- consolidate exemptions and class order relief from disclosure, licensing, hawking, advertising and other obligations under the Corporations Act;
- relax the requirements to lodge disclosure documents; and
- remove the cessation of employment taxing point for tax-deferred ESS that are available for all companies, with tax instead to be deferred until the earliest of the remaining taxing points.
The reforms will be of particular interest to start-ups and other viable, but “cash poor”, businesses as they will allow them to be more competitive in recruitment.
Consultation on the operation of foreign investment reforms
Treasury is conducting an evaluation of the operation of the major reforms to Australia’s foreign investment framework which commenced on 1 January 2021 (see our previous Insight on the reforms). Consultation closes on 31 August 2021. The consultation paper sets out key areas for potential comment, including:
- Treasury’s efforts in aiding investors’ understanding of the reforms;
- Investors’ key considerations when choosing to invest in Australia (including where foreign investment screening sits in those considerations) and the impact of COVID-19 and the international investment environment;
- Understanding of the national security screening requirements and factors investors consider when deciding whether to voluntarily notify;
- Whether the new powers and increased enforcement penalties have changed attitudes and behaviours towards compliance and whether guidance on the new compliance obligations is clear and adequate;
- Whether the new streamlining measures have reduced the regulatory burden on investment funds, views on the expected utility of the new passive foreign government investor exemption certificate and any other opportunities to streamline the screening process; and
- Whether the new fees framework affects decisions to invest in Australia including when and how to apply for approval and whether further fees guidance is needed.
In addition, on 21 July 2021, Treasury updated the Guidance Notes available on the FIRB website to provide greater clarity to investors about their obligations under the foreign investment framework, including by addressing a number of issues identified by the Treasury, the ATO and stakeholders since commencement of the reforms. Changes have been made to all Guidance Notes except the Conditions Reporting Guidance Note (G13).
Government seeks feedback on options for regulatory reform to strengthen cyber security practices
Earlier this year, G+T’s Technology + Digital team discussed the possibility of the Government implementing CPS 234 like obligations onto ASX listed companies and that all companies should be considering measures to protect themselves and their customers against cyber risk, irrespective of potential government regulation. The Department of Home Affairs has now released as part of its Australia’s Cyber Security Strategy (2020) a discussion paper, Strengthening Australia’s cyber security regulations and incentives which discusses options for cybersecurity expectations and standards in corporate governance and in the dealing of information assets by large businesses.
A recent insight by G+T’s Technology + Digital team discusses the reform options proposed in the paper.
COVID-19: Updated vaccination guidelines for employers
In the context of the ongoing outbreak of the Delta COVID-19 variant and the increasing availability of vaccines, the Fair Work Ombudsman (FWO) has now updated its Guidelines for Workplace Vaccinations (Guidelines).
The Guidelines provide important guidance to employers as to when, and in what circumstances, it will be considered “lawful and reasonable” to direct an existing or prospective employee to receive a COVID-19 vaccination. The Guidelines also outline the types of employers where it may be considered reasonable to direct an employee to receive a vaccination. While the Guidelines have no direct legal force, they are a clear indication of the FWO’s views on how vaccinations in the workplace should be managed.
High Court has final say on casual employees
The High Court has overturned a decision of the Federal Court regarding the nature of casual employment, noting that a “casual employee” is an employee who has no firm advance commitment from the employer as to the duration of the employee’s employment.
In WorkPac Pty Ltd v Rossato, the Federal Court had determined that Mr Rossato was not a casual employee for the purposes of the Fair Work Act 2009 (Cth) (FW Act) and declared that he was entitled to the payments he claimed as a permanent employee. The High Court unanimously allowed an appeal and subsequently overturned this ruling.
A recent G+T Insight examines the implications of this decision and the recent amendments to the the FW Act, and outline the next steps employers should take.
Read more: High Court has final say on casual employees
Ransomware – to pay or not to pay?
Ransomware attacks have been making headlines this year following a spate of high profile attacks on critical infrastructure globally. Operations as diverse as Ireland’s healthcare system, a major US oil pipeline and meat supplier JBS have all been targeted and impacted by ransomware.
But what is ransomware, and why is it suddenly so prevalent? A recent G+T Insight examines recent trends in ransomware, explores various ransomware models, considers the legality (and ethicality) of paying a ransom and details some strategies companies can use to help protect themselves from ransomware attacks.
Read more: Ransomware – to pay or not to pay?
Complete Guide to Infratech in Australia
Infratech is the use of new technologies in an infrastructure environment, enabling more innovative, better connected, more robust and smarter infrastructure. The very word “Infratech” brings together the two streams – infrastructure and technology. Think transport, power, water, defence – very few infrastructure projects will now be built without a technology element.
Although technology has long been a feature of infrastructure projects, the relationship between the two has changed.
Read more: Complete Guide to Infratech in Australia