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.
Australia’s Cyber Security Strategy for 2023 – 2030 is here
On 22 November 2023, the Federal Government released the 2023-2030 Australian Cyber Security Strategy and Action Plan. Together these initiatives will affect cyber planning for all businesses operating in Australia.
A recent G+T Insight by our Technology + Digital team discusses the key takeaways of the strategy and action plan including the six “cyber shields”, proposed legislative reforms, timeline and what’s to come.
In other developments:
- In the recent ASIC Market Integrity Update, ASIC has called for increased vigilance for cyber threats following the findings and insights from the ASIC cyber pulse survey 2023 (see REP 776 released on 17 November 2023). ASIC says the survey identified deficiencies in cyber risk management of critical cyber capabilities, indicating that organisations are reactive rather than proactive when it comes to managing their cyber security;
- The Australian Signals Directorate's Australian Cyber Security Centre has developed the Strategies to Mitigate Cyber Security Incidents, to help organisations protect themselves against various cyber threats; and
- The Federal Government has announced public consultation on proposed new mandatory industry codes for the private sector to outline the responsibilities of the private sector in relation to scam activity, which would focus initially on banks, telco providers and digital platforms. Consultation is open until 29 January 2024.
ACCC’s final guidance on environmental claims: it’s all in the detail
On 12 December 2023, the ACCC issued its final guidance for businesses making environmental claims, with its eight “principles for trustworthy environmental claims”. In the accompanying media release, Acting ACCC Chair Catriona Lowe noted that “by following the principles in our guidance, businesses can more confidently make meaningful claims that consumers can understand and trust. It is important for businesses to consider whether they are exaggerating the environmental benefits of their product or services and whether they have a reasonable basis to make the claims, otherwise they risk breaching the Australian Consumer Law”.
A recent G+T Insight takes an in depth view of the final guidance and the changes from the ACCC’s draft guidance (for further details on the draft guidance, see previous G+T Insight). While the principles remain substantially similar to those in the draft guidance, there are some important changes in the detail of the final guidance.
It also considers recent developments relating to MOO Premium Foods and Mercer Superannuation (Australia) Limited which give further context around how both the ACCC and ASIC have refined their approaches to greenwashing enforcement.
Modern slavery reforms: first national Anti-Slavery Commissioner
On 30 November 2023, the Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Bill 2023 (Bill) was introduced (and had its second reading) in the House of Representatives. The Bill seeks to amend the Modern Slavery Act 2018 (Cth) (Act) and follows the statutory review of the Act earlier this year (see previous G+T Insight on the Review Report).
A recent G+T Insight summarises key provisions of the Bill which proposes to establish a new Australian Anti-Slavery Commissioner to support compliance with the Act and improve corporate and social accountability and better prevent modern slavery.
We expect the Bill to be just one part of a larger program of reform by the Australian Government in relation to modern slavery. The full scope of this will become better known once the Government provides its full response to the Review Report. We anticipate that the Government will announce its intentions in respect of other recommendations in the Review Report next year.
Unfair contract terms: a reminder (and what to expect from the ACCC next) and recent High Court decision
It’s been over a month since significant changes to the unfair contract terms (UCT) regime came into effect on 9 November 2023. The changes made UCTs illegal and subject to significant penalties and vastly expanded the types of small business contracts that are now subject to the UCT regime.
A recent G+T Insight by G+T’s Competition, Consumer + Market Regulation Team covers:
- the three new contravention provisions and what they mean;
- practical issues arising from these changes; and
- what to expect from the ACCC next.
G+T’s Competition, Consumer + Market Regulation Team has also published a further insight on the recent unanimous High Court of Australia decision of Karpik v Carnival plc. The case provides clear guidance on the interaction between choice of law, exclusive jurisdiction and class action waiver clauses and the UCT regime, as well as the extraterritorial application of the Australian Consumer Law.
A case for radical reform: Treasury consults on the future of merger control in Australia
On 20 November 2023, the Treasury’s Competition Taskforce released its consultation paper setting out potential options to reform Australia’s merger control regime as part of its two-year Competition Review and has asked for submissions by 19 January 2024. Importantly, the Consultation Paper is seeking views on a much broader basis than the ACCC’s recommendations to the Government (see previous G+T Insights here and here).
A recent G+T insight distils the various options and issues raised by the Competition Taskforce for consultation to assist you in considering how they may impact your M&A activities.
ASIC announces 2024 enforcement priorities
On 21 November 2023, ASIC announced its enforcement priorities for 2024. ASIC noted that it has retained its priorities concerning greenwashing, enforcing design and distribution obligations, and governance and directors’ duties failures, but has added a number of new priorities including:
- in the superannuation industry - a focus on member services failures and misconduct relating to the erosion of superannuation balances:
- in relation to insurance claims handling - compliance with financial hardship obligations and the reportable situation regime; and
- a new priority related to technology and operational resilience for market operators and participants to maintain market integrity.
ASIC will also be taking action against misconduct relating to used car financing to vulnerable consumers and gatekeepers such as auditors, registered liquidators and financial services and credit licensees who do not comply with their legal obligations.
ASIC’s goal is to “create a culture of compliance across Australia’s financial system and the corporate sector more generally through decisive and high-profile enforcement action”. At the ASIC Annual Forum in Melbourne, ASIC Deputy Chair Sarah Court announced the regulator’s continued focus on delivering strong enforcement outcomes and noted that ASIC has been taking matters to court (including against some of Australia’s biggest corporations) and pursuing higher penalties than ever before.
FAR on the horizon: Evaluating enforcement measures
The Financial Accountability Regime (FAR) will apply to the banking sector from 15 March 2024 and superannuation and insurance industries from 5 March 2025. Whilst a similar regime exists in the United Kingdom from which some guidance may be derived, the application of FAR in Australia remains to be tested.
A recent G+T Insight on 21 November 2023 considers the potential enforcement actions and approach that regulators could adopt if accountable entities and accountable persons have not acted in accordance with their FAR obligations.
A previous G+T Insight discusses how we can help you to implement FAR to support effective governance, risk and compliance.
Special dividend franking credit changes passed
G+T’s Tax team previously wrote about the uncertainty on the availability of franking credits on special dividends that was created by the Treasury Laws Amendment (2023 Measures No 1) Bill 2023 (Bill) when it was introduced into Parliament on 16 February 2023 (see previous insight here).
After intense criticism, scrutiny by the Senate and submissions by industry bodies, including G+T, the Bill passed both houses of Parliament on 16 November 2023 and received assent on 27 November 2023. See the Treasury Laws Amendment (2023 Measures No 1) Act 2023.
A further Insight by G+T’s tax team considers amendments made since the Bill was introduced which are largely positive although concerns remain with the breadth of the franking credit measures. The new Act also covers other changes including off market share buy backs (discussed in a previous G+T Insight).
On 11 December 2023, the ATO also announced consultation to identify priority issues where new ATO advice or guidance is needed to help apply the franking credit changes. Consultation closes on 16 February 2024. See ATO consultation paper and media release.
Government supports ACCC Digital Platform Services Inquiry recommendations in principle
On 8 December 2023, Treasury released its Government Response to the ACCC Digital Platform Services Inquiry to the ACCC’s recommendations set out in the ACCC’s Digital Platform Services Inquiry interim report (see previous G+T Insight).
The ACCC had previously made 4 recommendations to address the harms digital platforms pose to consumers, small businesses and competition:
- economy-wide consumer measures (eg, an economy wide prohibition against unfair trading practices and the strengthening of unfair contract terms laws);
- digital platform specific consumer measures (eg, mandatory internal dispute resolution standards to ensure accessibility);
- additional competition measures (eg, a power to make mandatory codes of conduct for digital platforms); and
- targeted competition obligations (eg, targeted obligations to address, eg, unfair dealings with users).
The Government supported all 4 recommendations in-principle. Minister for Communications, the Hon Michelle Rowland noted that ‘This work builds on measures the Albanese Government is taking to strengthen regulatory frameworks for digital platforms, including our strong action on scams and proposals to improve transparency of digital services’. See also Treasury media release.
Thanks to Justin Mannolini, Casandra Lee and Adam Sibum for this insight.
New payment licensing framework to be introduced
On 8 December 2023, Treasury released its second consultation paper on proposals to expand licensing regulation for payment service providers. Consultation closes on 2 February 2024.
The consultation paper follows Treasury’s first consultation paper covering ‘in scope’ activities and a draft bill that was recently introduced into Parliament regarding amendments to the Payment Systems (Regulation) Act 1998 (Cth) These enhancements form part of the Government’s Strategic Plan for Australia’s Payments System.
As expected, Treasury proposes expanding the remit of the financial services licensing regime to cover a broader range of payment intermediaries. A recent G+T Insight unpacks the proposals to regulate the payments industry across 5 key areas (and what the proposals mean for payment service providers).
AASB and AUASB joint report on trends in climate-related disclosures
On 27 November 2023, the AASB and the AUASB published a joint research report titled “Trends in climate-related disclosures and assurance in the Annual Reports of ASX-listed entities” . This report builds on another report previously issued by the regulators by extending the 2018-2021 sample period to include data from 2022.
The report identifies the following trends:
- there has been an increase in disclosure rates among listed entities, rising from 36.1% in 2021 to 42.8% in 2022;
- entities in climate-sensitive industries are more likely to disclose climate-related information in comparison to entities in other industries;
- most climate-related disclosures are outside of the financial statements and therefore not subject to audit;
- there continues to be an increase in the number of disclosers referencing the Task Force on Climate-related Financial Disclosures recommendations, including reporting against the four pillars;
- the number of climate-related content in Key Audit Matters continues to increase; and
- of the entities that referenced additional third-party assurance of climate-related information in their Annual Report (which made up approximately 5% of entities sampled), the vast majority only provided limited assurance.
See also AUASB media release.
Federal court rejects Optus’s privilege claim over Deloitte report
In the recent decision of Robertson v Singtel Optus Pty Ltd [2023] FCA 1392, the Federal Court of Australia found that a forensic investigation report produced by Deloitte following the cyberattack on Singtel Optus and its related entities was not protected by legal professional privilege.
The Court recognised that factual investigation reports may be protected by legal professional privilege in some instances. However, in this instance, the Court found that the Deloitte Report was not prepared for the dominant purpose of providing legal advice and rejected Optus’s claim for privilege.
A recent G+T Insight examines the decision and its impact on the engagement of external consultants.
Substantial shareholders: a substantial hurdle?
On 4 December 2023, shareholders of Australia’s largest listed energy company, Origin, rejected the ‘best and final’ offer proposed by a Brookfield-led consortium of investors and EIG Global Energy Partners to acquire Origin for approximately A$20 billion.
The bid has been one of Australia’s largest and lengthiest takeover battles in recent years. Although the Board of Origin continued to officially recommend the scheme, Origin’s largest shareholder, A$300 billion superannuation fund AustralianSuper – which controlled 17% of the vote – opposed the deal.
The rejection of the Brookfield and EIG bid is the latest development highlighting the challenges that target boards have faced in attempting to win shareholder support for large buy out bids in 2023. In August 2023, Azure Minerals Limited announced a recommended A$1.6 billion takeover bid from its largest shareholder, Sociedad Química y Minera de Chile S.A, which immediately triggered buying by interlopers Mineral Resources and Hancock Prospecting, and now seems unlikely to proceed (at least in the form contemplated). In October 2023, Abermarle Corporation walked away from its A$6.6 billion tilt at Liontown Resources Limited following sustained buying by Hancock, which was opposed to the transaction.
Although a takeover battle generally presents a boon for target shareholders, execution risks can also create downside risks particularly for arbitrage funds and those buying at or around the proposal price. Directors of target boards must exercise considerable judgment in balancing the conflicting objectives of long and short-term focussed shareholder groups when considering control proposals: a task made all the more difficult when there is a divergence of opinion on the underlying value drivers of the target’s business.
Thanks to Justin Mannolini, Cassandra Lee and Adam Sibum for this insight.
Takeovers Panel publishes reasons for making a declaration of unacceptable circumstances in relation to the affairs of Bullseye
On 15 November 2023, the Takeovers Panel published its reasons for making a declaration of unacceptable circumstances in relation to the affairs of Bullseye Mining Limited (Bullseye).
The Panel considered that:
- the off-market takeover bid by Emerald Resources NL (Emerald) for Bullseye, shareholder intention statements executed by two of Bullseye’s substantial shareholders, and the settlement of oppression proceedings between Bullseye and those two shareholders were interconnected as part of one commercial transaction; and
- by entering into the shareholder intention statements and procuring the settlement of the oppression proceedings, Emerald acquired a relevant interest in the shares held by the two substantial shareholders and increased its voting power in Bullseye from approximately 57.34% to approximately 75.54% (in contravention of section 606 of the Corporations Act 2001 (Cth)).
The Panel further noted that an independent expert would be better placed to assess whether there has been a benefit given to the two substantial shareholders that was not otherwise provided to other Bullseye shareholders and ordered that Bullseye commission an independent expert’s report to opine on this issue.
The Panel’s decision is an example of the broad operation of the “relevant interest” concept underpinning much of Chapter 6 of the Corporations Act (the takeovers provisions) and the need for caution when soliciting support for control transactions from large shareholders.
Thanks to Justin Mannolini, Cassandra Lee and Adam Sibum for this insight.
The UAE Consensus: key outcomes form COP28
The COP28 climate conference concluded last week, with parties finally agreeing their response to the first Global Stocktake under the Paris Agreement. The conference also saw parties agree on the operationalisation of the global loss and damage fund that will provide financial assistance to vulnerable nations suffering from climate change impacts, as well as the framework for the Global Goal on Adaptation.
While these developments are significant, other workstreams on Paris Agreement implementation, including Article 6 negotiations, saw much less progress, with a number of issues deferred for further consideration next year.
A recent G+T insight reflects on the key outcomes of the conference, and what they mean for Australian businesses as we look ahead to a critical year for action in 2024.
Decarbonising Australia: Policy pulse check
On 16 November 2023, G+T’s decarbonisation team released our report Decarbonising Australia: Policy Pulse Check. The Report follows a G+T pulse survey to obtain feedback from active industry participants on Australia’s energy transition and on the legal, political, and commercial challenges they are facing on their decarbonisation journey.
The Report combines quantitative and qualitative data from our clients with analysis from our partners and other thought leaders who are advising the businesses that are driving Australia’s energy transition.
The Report reveals that effective policy setting and regulation is a significant and complex challenge. A broader culture of thinking and a deeper engagement on the challenge is required for Australia to reach its net zero target.
New Competition, Consumer + Market Regulation Team updates – The Rap Sheet and The Pulse
G+T’s Competition and Regulation Team are now publishing 2 new regular new updates:
- The Rap Sheet - a quarterly update which provides an overview of the most important cases and enforcement issues over the previous quarter and a look ahead at upcoming themes, we well as an insight into a current and important development. The first edition looks at a string of recent cartel cases where the ACCC has brought “attempt to induce” claims in a strategy that appears intended to push the boundaries of cartel liability and to avoid the challenges of establishing a concerted practice. You can subscribe to The Rap Sheet here;
- The Pulse – a monthly update which covers the latest trends in healthcare and life sciences and insights from across the healthcare industry to keep your business informed and ahead of the curve. The most recent edition focus on AI and health and how emerging technologies are being used to advance patient care. You can subscribe to The Pulse here.
Visit SmartCounsel
