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.
Bill introduced to make temporary relief reforms for virtual meetings and electronic execution permanent
The Corporations Amendment (Meetings and Documents) Bill 2021 introduced into Commonwealth Parliament on 20 October 2021 proposes to permanently maintain the ability to hold virtual meetings, distribute meeting materials electronically and execute documents electronically. See the Treasury’s media release.
The key change for virtual meetings is the ability to hold meetings as hybrid meetings, being in person and online, or purely online where the entity’s constitution permits doing so (although there is strong market push-back against attempts to enable purely virtual meetings since the temporary virtual meeting rules were introduced in early 2020).
Less controversially (and a win for the shift to remote working being the “new normal”), the Bill also allows entities to send meeting-related materials (such as a notice of meeting) electronically or in hard copy (and enables shareholders to elect their preferred format), and allows certain documents including those executed by companies under section 127 of the Corporations Act to be electronically executed.
New Director Identification Number regime – what does it mean for directors?
The new Director Identification Number (DIN) regime (which is being introduced primarily to combat “phoenixing’) has now come into effect on a progressive basis. Importantly, new directors appointed between 1 November 2021 and 4 April 2022 will need to apply for a DIN within 28 days of their appointment as a director (and those appointed after 4 April 2022 will need to apply for a DIN before they are appointed). Existing directors appointed before 31 October 2021 have until 30 November 2022 to apply for a DIN but can apply now if they would like to. See the ABRS Website for more details.
A recent insight by G+T’s Charities and Social Sector team outlines the new regime.
Read more: 5 things charities and NFPs should know about the new Director Identification Number
Revised Takeovers Panel’s GN 20 on Equity Derivatives
On 4 October 2021, a revised version of Takeovers Panel Guidance Note 20: Equity Derivatives came into effect. GN 20 requires that market participants disclosure equity derivative positions if the long position of a person and their associates is 5% or more than the voting rights of an entity and/or changes by at least 1% or falls below 5% of the voting rights of an entity.
Derivatives have historically been used in a number of takeover contexts to accumulate an economic position in the target without the full glare of publicity. The Panel’s rules essentially treat the economic power conferred by derivative arrangements as akin to “voting power” within the meaning of the takeovers provisions of the Corporations Act.
However, companies should be aware of the heightened scrutiny of the use of derivatives outside of the takeovers context, and that any disclosure lapses may give rise to unacceptable circumstances, regardless of whether a control transaction has commenced.
Net zero commitments – The latest minefield for directors
As the global transition to clean energy sources continues, directors face increasing demands from a variety of stakeholders to establish and promote their company’s “green credentials”. However, as recent litigation both in Australia and abroad demonstrates, this is not without risk. “Greenwashing” is now firmly in the sights of both regulators and well-funded private litigants. In its recent Corporate Finance Liaison Meeting, ASIC indicated that it will closely monitor net zero commitments to ensure that any entity making net zero claims has a reasonable basis for doing so.
A recent G+T Insight captures the conundrum directors face between balancing their duties and maintaining a social license to operate in the context of “net zero commitments” and the associated legal risks of publishing such commitments.
“It’s not easy being green” – Sustainability Linked Loans and avoiding the “Greenwash”
Corporates of all sizes (and their key stakeholders) are asking how they should respond to an ever growing list of environmental, social and governance (ESG) concerns, in a way that both delivers positive outcomes for society as a whole, but also for their business, clients, management, employees and investors. What has become clear over the past 12 months is that paying “lip-service” to ESG concerns is no longer enough - and in fact can be a dangerous game for corporates to play if their public policies and statements are not supported by corporate conduct and investment decisions which produce measurable ESG benefits.
A recent G+T Insight considers the rapidly growing Australian Sustainability Linked Loan (SLL) Market and how a corporate borrower (or its sustainability coordinating banks and other advisors) avoid the accusations of “greenwashing” on their exciting new SLL transaction.
Read more: “It’s not easy being green” – Sustainability Linked Loans and avoiding the “Greenwash”
Data breaches, continuous disclosure and class actions: unwelcome bed fellows
A recent study released by Australian Institute of Company Directors identified cyber crime as the equal number 2 issue that would “keep [Directors] awake at night” (followed by data security as number 4). Recent high-profile hacks, ransomware attacks and data breaches involving ASX listed entities, public institutions, universities and even regulators indicate that directors have good reason to hold these concerns.
Although it is hard to quantify, a 2018 study commissioned by Microsoft estimates that the direct economic loss to Australian businesses from cyber attacks is equivalent to A$29 billion per annum, including lost revenue, decreased profitability, fines, lawsuits and remediation. This number would have increased substantially in the 3 years since.
Australia’s unique data breach regulatory system, coupled with its class action environment and continuous disclosure framework, combine to create a complicated and volatile environment for directors to navigate in the event of a cyber attack.
A recent G+T Insight explores the key matters which directors and in-house counsel should focus on in this cyber landscape, including the areas of potential liability for a company and its directors in the event of a cyber breach. It also explores what directors and in-house counsel can do to get on the front foot in order to prepare for, and respond to, a cyber attack.
Senate committee recommends new regulatory roadmap for digital assets and businesses
On 20 October 2021, the Senate Select Committee on Australia as a Technology and Financial Centre (Committee), led by Senator Andrew Bragg, released its highly anticipated final report into the regulatory future of Australia’s technology, finance and digital asset industries.
Based on more than 100 submissions, the report sets out 12 key recommendations, positioning Australia as a leading hub for digital currency related businesses by offering greater clarity on how digital assets and digital asset-adjacent services should be regulated. The report includes recommendations addressing cryptocurrency and digital asset regulation, decentralised autonomous organisations, Australia’s tax and anti-money laundering and counter-terrorism financing regimes in the digital asset context, issues relating to de-banking, the policy environment for Australian neboanks, and options to replace the Offshore Banking Unit.
The Committee’s report represents a significant moment in the future regulation of digital assets, with many of the recommendations being among the first of their kind globally to comprehensively address such matters at a legislative level. A recent G+T Insight summarises the Committee’s 12 recommendations.
In the Government we trust: Have your say on the Trusted Digital Identity Bill
On 1 October 2021, the Australian Government released the exposure draft of the Trusted Digital Identity Bill 2021 for consultation. If passed, the Bill will establish a national Trusted Digital Identity System to be used by both government and private sector entities to verify the identities of their customers when supplying online services.
A recent G+T Insight summarises the key elements of the Bill and analyse some issues for industry participants to consider in making submissions.
ACCC v Google showdown: Ad Tech Inquiry Final Report
The ACCC wants new powers to tackle dominance in ad tech. They have concluded that Australia’s existing competition laws are insufficient to address market power and protect publishers, advertisers and consumers from harm within the ad tech supply chain.
A recent G+T Insight unpacks the ACCC’s conclusions from their recent Digital Advertising Services Inquiry Final Report and analyse its call for new powers to tackle the dominance of ad tech suppliers such as Google.