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.
Government consults on Australian climate-related financial disclosure framework
On 12 December 2022, the Federal Government released a consultation paper seeking feedback on the design and implementation of the Government’s commitment to a standardised, internationally-aligned climate-related financial disclosure framework.
The framework proposes a ‘phased’ approach where the increased disclosure obligations would first apply to large, listed entities and financial institutions, and be later expanded to smaller firms. The proposed regime could commence as early as 2024, with the first reports being required for the 2024-2025 financial year. The Federal Government also considers that there is scope for the proposed regime to be aligned to the recommendations of the Task Force on Climate-Related Financial Disclosures initially, and reflect the International Accounting Standards Board standards when they become available for adoption in Australia.
Treasurer Dr Jim Chalmers stated that the proposed reforms will ‘ensure Australia can grasp the economic opportunities from more investment in cleaner, cheaper and more reliable energy, and manage the financial risks that climate change presents’. Submissions on the consultation paper are due by 17 February 2023. See Treasury media release.
Many thanks to Justin Mannolini and Cassandra Lee for this insight.
First Annual Climate Change Statement delivered by Minister for Climate Change and Energy
On 1 December 2022, the Federal Minister for Climate Change and Energy, Chris Bowen, tabled the first Annual Climate Change Statement required under the new Climate Change Act 2022 (Cth) in Parliament.
The Annual Climate Change Statement outlines Australia’s progress in achieving its emissions reduction targets, the economic, environmental and social risk that climate change poses, international developments relevant to addressing climate change, and the effectiveness of Australia’s policies in contributing to achieving its targets.
Mr Bowen commented that the Annual Climate Change Statement ‘shows we are on the right track, but it is also a wake-up call for the nation to do more’. See Department of Climate Change, Energy, the Environment and Water media release.
Many thanks to Justin Mannolini and Cassandra Lee for this insight.
ASIC calls for increased disclosure on material business risks in annual reports and highlights expectations in relation to sustainability-related disclosures
The director's report often gets minimal attention from the Board in the preparation of a company’s Annual Report, but ASIC would like to see that change.
On 30 November 2022, ASIC issued a media release calling on company directors to ensure they better inform shareholders and prospective investors by ensuring that material business risks are adequately disclosed in annual reports.
Five listed entities recently provided additional disclosure in response to the regulator’s concerns that the operating and financial review of their directors’ reports did not properly disclose material business risks.
ASIC Commissioner Sean Hughes stated that the operating and financial review ‘helps to inform the decision-making of investors by disclosing material business risks that may affect the achievement of a listed entity’s strategies and prospects’.
In addition, ASIC Commissioner Sean Hughes recently urged directors, auditors and other personnel preparing annual and half-year reports to consider whether their reports provide useful and meaningful information (see ASIC media release).
ASIC has highlighted the following areas for attention in its review of 21 December 2022 annual and half-yearly reporting:
- asset values;
- solvency and going concern assessments;
- events occurring after year end and before completing the financial report; and
- disclosures in the financial report and the operating and financial review.
On 7 December 2022, ASIC also released an article by ASIC Commissioner Sean Hughes highlighting the regulator’s expectations on sustainability-related disclosures. Mr Hughes warned that ASIC will be ‘focused on the oversight of sustainability-related disclosure and governance practices of listed companies, managed funds, superannuation funds and green bonds’.
ASIC is concerned by the lack of consistency, comparability and structure in disclosure practices by larger listed companies and continues to encourage adherence to the Task Force on Climate-related Financial Disclosures’ recommendations. Further, Mr Hughes encouraged directors to consider what governance structures might be required to be developed now to best support adherence to future disclosure and reporting practices, such as those proposed by the International Sustainability Standards Board. See ASIC media release.
Many thanks to Justin Mannolini and Cassandra Lee for this insight.
‘Climate litigation’ on ice for governments, but industry to feel the heat
In the last two years, climate litigation has emerged as a diverse and popular tool for individuals, activists and shareholders alike to effect change in the behaviour of government and private enterprise directed to the reduction of carbon emissions. However, the Full Federal Court’s decision to overturn Sharma earlier this year highlighted the legal and policy barriers to establishing a duty of care owed by government departments in respect of climate change risks and harm.
Whilst a change in government has heralded a more pro-active climate change response by government, there is no apparent indication that the Albanese government will put a target on its, or any successive government’s back, by proposing such legislative reform.
A recent G+T Insight considers 2 recent notable decisions which are a telling reminder to project proponents in carbon intensive industries such as mining, oil and gas that the level of public scrutiny in respect of their activities has reached an unprecedented intensity, as well as international developments which could have significant implications for entities with offshore interests.
And so it begins: ASIC takes its first enforcement action for greenwashing
A G+T Insight discusses the ‘greenwashing’ infringement notices issued by ASIC to Tlou Energy Limited and outline strategies your organisation could implement to reduce the risk of greenwashing.
This is the first enforcement action by ASIC in relation to greenwashing. This development is consistent with ASIC’s previous statements that it will not hesitate to take action to prevent harms arising from greenwashing and is also consistent with the crackdown on greenwashing by overseas regulators.
Government introduces Bill to modernise business communications
On 23 November 2022, the Federal Government introduced the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Bill 2022 (Cth) (Bill) to the House of Representatives. The Bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 3 March 2023 and submissions on the Bill are due by 31 January 2023.
The Bill seeks to amend the Corporations Act 2001 (Cth) and various other pieces of Commonwealth legislation with the aim of modernising communication methods. If passed, the Bill will:
- permit all documents under the Corporations Act to be signed or executed electronically;
- permit a significant number of documents under the Corporations Act to be sent either electronically or by hard copy;
- introduce relief so that companies are not required to send documents to members where the contact details for those members are known to be incorrect;
- amend various pieces of legislation to ensure that regulatory bodies under the portfolio of the Department of Treasury can hold hearings and examinations via technology;
- permit the use of electronic payment; and
- replace provisions in Treasury laws requiring notices to be published in newspapers with a requirement to publish them in an accessible and prominent manner.
National Anti-Corruption Commission: implications for private sector
The National Anti-Corruption Commission Act 2022 (Cth) finally passed both houses of Parliament on 30 November 2022 and received royal assent on 12 December 2022. The Act establishes the National Anti-Corruption Commission (NACC). It invests it with broad powers to investigate and conduct inquiries (whether following a public complaint, agency referral or on their own initiative). The NACC will be tasked with investigating corruption issues that the Commissioner believes could involve serious or systemic corrupt conduct.
The NACC will have broad and retrospective powers impacting not only Government but also those in the private sector who work with Government. A recent G+T Insight outlines pro-active steps that private sector companies can take ahead of the NACC’s creation.
AUSTRAC consults on guidance for financial institutions
On 21 November 2022 AUSTRAC released for consultation until 21 December 2022 draft guidance for financial institutions when providing designated services to customers financial institutions when providing designated services to customers that have been assessed as being high risk for money laundering and terrorism financing (ML/TF). Designated services include a range of business activities in the financial services, bullion, gambling and digital currency exchange (DCE) sectors.
While de-banking of certain industries is not new, the consultation follows an increase in financial institutions either declining, withdrawing or limiting the designated services provided to customers that are assessed as high risk for ML/TF.
The guidance responds to the Council of Financial Regulators third recommendation in the Potential Policy Responses to De-Banking in Australia report released in August 2022, to provide guidance to the four major banks of AUSTRAC’s expectations in relation to their risk tolerance and requirements to bank the DCE, fintech and remittance sectors.
While the substance of the guidance does not change statutory obligations for reporting entities, it clarifies AUSTRAC’s expectations of the way that reporting entities and high-risk customers manage their relationship to mitigate de-banking.
ACCC lays new turf with its first stand alone concerted practices enforcement outcome
The ACCC has secured its first formal enforcement outcome that relates solely to the concerted practices provisions of the Competition and Consumer Act 2010 (Cth) which was introduced into law in 2017.
On 18 November 2022, Lawns Solutions Australia provided the ACCC with a court enforceable undertaking that related to, among other things, its conduct in sharing information with third parties, which the ACCC considered likely amounted to an illegal concerted practice.
A recent G+T Insight considers the decision and the key takeaways for other businesses.
ACCC designs Australia’s future framework for regulating digital platforms
The highly anticipated fifth instalment of the ACCC’s Digital Platform Services Inquiry (DPSI 5) was released on 11 November 2022. DPSI 5 makes a series of recommendations for legislative reform to address issues relating to digital platforms that the ACCC has previously identified could potentially harm consumers, small businesses and competition in general.
DPSI 5 recognises that digital platforms offer many valuable services to consumers and businesses, and they have allowed significant positive changes in our society to take place including changing the way we work, study, communicate and do business. Nonetheless, the ACCC is concerned that the widespread use of digital platforms can create opportunities for misuse of the platforms in a way that could harm consumers, competition and the Australian economy. The ACCC has sought to balance these competing notions in its thoughtful and measured report, which arguably reflects the evidence and principled-based approach to regulation taken by its new Chair, Gina Cass-Gottlieb.
A recent G+T Insight takes a deep dive into the recommendations themselves and what they may mean for digital platforms, consumers and companies that interact with them and the broader Australia economy.
Read more: ACCC recommends regulating digital platforms
Commonwealth penalty unit to increase to $275 from 1 January 2023
On 12 December 2022, the Crimes Amendment (Penalty Unit) Act 2022 (Cth) received assent.
The Act increases the Commonwealth penalty unit from $222 to $275 (an approximate 24% increase) and the increased penalty unit will apply to offences committed on or after 1 January 2023. The increase will have no impact on current proceedings for Commonwealth offences.
The amount will continue to be indexed every 3 years with the next indexation being on 1 July 2023.
Increase in privacy penalties given go-ahead: Privacy Amendment Act receives assent
The Privacy Legislation Amendment (Enforcement and Other Measures) Act 2022 (Cth) (Act), which was tabled following the unprecedented data breaches affecting Optus and Medibank, received assent on 12 December 2022.
While already in the crosshairs of the ongoing review into the Privacy Act 1988 (Cth) by the Attorney-General’s Department which was originally announced in December 2019 (Privacy Act Review), the subject matter of the Act was considered imperative to legislate as soon as possible given the worsening cyber incident risk climate and the palpable public concern about the security of their personal information.
A recent G+T Insight (Increase in privacy penalties given go-ahead - Privacy Amendment Bill passes both Houses examines the Act and its 4 key objectives:
- to significantly increase penalties for serious or repeated privacy breaches;
- to give the Office of the Australian Information Commissioner (OAIC) enhanced powers to request information and conduct compliance assessments of the notifiable data breach regime;
- to give the OAIC new enforcement powers, allowing the OAIC to require entities to conduct external reviews of their internal procedures and to publish notices about specific privacy breaches to affected individuals; and
- to introduce new information sharing powers for the OAIC and the Australian Communications and Media Authority.
In addition, the Bill also makes small but significant tweaks to the Privacy Act which widen its extraterritorial application.
G+T’s Technology + IP team has also published a series to guide you through the key issues that have been raised by the ongoing Privacy Acy Review. See below for the issues so far in the series:
- Privacy Law Reform Series: Overseas transfers of information
- Privacy Law Reform Series: Direct marketing
- Privacy Law Reform Series: A Statutory Tort
- Privacy Law Reform Series: New Penalties and changes to the Notifiable Data Breach Regime
- Privacy Law Reform Series: Employee Records Exemption
- Privacy Law Reform Series: Definition of “Personal Information”
- Privacy Law Reform Series: Right of Erasure
- Privacy Law Reform Series: Are global cross-border rules a key part of the Privacy Act’s reform?
Keeping tabs on Australia’s largest creditor: The ATO
Corporate Australia is bracing for the long-awaited surge in insolvencies. As Australia’s largest creditor and, according to creditor reporting bureau Creditor Watch, responsible for the greatest number of company windups prior to the COVID-19 pandemic in 2019, the ATO can fairly be described as an influential, if not dominant, player in the restructuring and turnaround space and in corporate Australia more broadly.
A recent Insight by G+T’s Restructuring + Insolvency Team discusses the influential role the ATO plays in the restructuring and turnaround space, in light of its recommencement of recovery action this year (following its “lighter touch compliance approach” in the previous two years), as well as its recently announced plan coined “Tax 3.0” which aims to see a fully digitalised tax office.
A fee to walk? Supreme Court addresses bidder off-ramps in SID
Perpetual’s proposed acquisition of Pendal for cash and scrip via scheme of arrangement took an interesting turn when Perpetual itself became the subject of a control proposal. That brought into sharp focus the terms of the scheme implementation deed (SID) and saw many offer opinions on whether (and the consequences of) Perpetual walking. The parties couldn’t agree on that either so they asked the NSW Supreme Court to resolve it.
The Court said the SID did not exclude Pendal’s right to specific performance or injunctive relief, even if Perpetual breached the SID to pursue a “Perpetual Major Transaction” or otherwise did not proceed with the scheme. The decision is a good reminder for bidders and targets to ensure they know what they’re getting with a reverse break fee.
A recent G+T Insight analyses the decision and highlights some key takeaways.
Federal Court rejects agreed Uber penalty, settles on $21 million
Uber has been ordered by the Federal Court to pay total penalties of $21 million for engaging in misleading and deceptive conduct and making false or misleading representations to consumers. Justice O’Bryan ordered this penalty after refusing to accept the joint penalty of $26 million that the parties submitted to the Court in July this year.
A recent G+T Insight considers the decision and its key takeaways.
COP27 concludes with a breakthrough on loss and damage, and with important directions for the business community
COP27 concluded on Sunday 20 November 2022, with Parties reaching agreement on a global loss and damage fund to provide financial assistance to vulnerable nations suffering from climate change impacts. While this is a significant development, other workstreams on the implementation of the Paris Agreement, including the mitigation work programme and market and non-market approaches under Article 6, saw less progress, with a number of issues deferred for further consideration in 2023.
Outside of negotiations, COP27 represented important developments for Australian public and private stakeholders alike. Firstly, the conference saw a step change in Australia’s engagement on the international climate stage, with the Federal Government committing to a number of initiatives that will likely represent opportunities for private sector engagement. Second, the role of private stakeholders was a focal point of the conference, as was highlighted by the release of the recommendations of the United Nations’ High Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities, and the launch of initiatives aimed at facilitating private sector ambition.