Australian directors will need to verify their identity with ASIC to obtain a Director Identification Number (DIN) should proposed legislation pass. Under proposed law changes, directors will have 15 months to apply for DIN from the date of the scheme starting, while new directors will have to apply within 28 days of becoming a director. The proposed legislation is part of a package to crack down on phoenixing activity. There will be civil and criminal penalties for directors who fail to apply for identification numbers.
Excerpt of an article by Prof. Bob Garratt, Chairman of the Centre for Corporate Governance, University of Stellenbosch and Visiting Professor in Corporate Governance, Sir John Cass Business School.
Garratt proposes that there are four levels of maturity through which all boards need to develop before they can prove their competence and professionalism. “Given an increasingly skeptical public view of board competence a conscious development process is no longer a choice for a board but a necessity.”
Key questions directors should ask themselves:
The Australian Institute of Company Directors puts it succinctly: “The principles that should be followed by financial services [Note ed. We would argue these apply to ALL companies] are simple: obey the law; do not mislead or deceive; be fair; provide services that are fit for purpose; deliver services with reasonable care and skill; and when acting for another, act in the best interests of that other.”
If a Director asks a question and it isn’t recorded in the board minutes, did it actually happen?
The Royal Commission into Banking has suggested CBA may have breached statutory responsibilities to keep accurate minutes of its meetings. The board minutes did not record an important question Ms Livingstone (now Chair of CBA) said she asked in a meeting about the AUSTRAC scandal. However, the minutes only recorded, “The board discussed and noted the report.”
How should you record director questions about internal audit and regulator reports?
Section 251A of the Corporations Act 2001 states
“1. A company must keep minute books in which it records within 1 month:
a) proceedings and resolutions of meetings of the company’s members; and
b) proceeding and resolutions of directors’ meetings; and
c) resolutions passed by members without a meeting; and
d) resolutions passed by directors without a meeting; and
e) if a proprietary company with one one director – the making of declarations by the director.
6. A minute that is recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved.”
In recording proceedings, it is important to get the balance right between making a record of discussion on a given item and the outcomes and; depending on the circumstances, including the importance of the relevant item. Recording board meetings verbatim, or recording individual opinions or speeches is inappropriate.
If a particular item covered in a Board meeting is discussed rather than simply taken as read and noted, a more appropriate approach would be to record against the item that “The following issues were discussed/queried by the Board” (list them) and further that “Management responded.”
Company director Betsy Atkins shares how boards can increase their digital IQ:
The government has released draft regulations to reduce the reporting burden for small and medium businesses by raising financial reporting thresholds, which have not been adjusted since 2007. If passed, the new changes will come into effect from 1 July 2019.
The thresholds of proprietary companies considered “large” (i.e. Required to prepare and lodge a financial report, a director’s report and an auditor’s report with ASIC each financial year) will be doubled as follows:
ASX has released a consultation paper, Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules seeking feedback on proposed listing rule amendments in 8 areas:
Further information and a list of annexures accompanying the consultation paper are available here.
Feedback on the consultation package is due by Friday, 1 March 2019 and should be sent by email to: email@example.com
Industry funding levies for FY2017-18
ASIC has calculated the levies payable by industry to recover regulatory costs and has sent out invoices in early 2019. Registered charities are excluded. Most small proprietary companies will contribute through a $4 increase to their annual review fee.
New Accounting Standards for full-year and half-year report at 31 December
Full and half-year reports at 31 December 2018 must comply with new accounting standards on revenue recognition and financial instrument values, including hedge account and loan loss provisioning. Reports must also disclose the future impact of new lease accounting requirements. There are also new standards covering accounting by insurers and the definition and recognition criteria for assets, liabilities, income and expenses.
Sources of information: Ashurst; Australian Government; Australian Institute of Company Directors (AICD); Australian Securities and Investments Commission (ASIC); Australian Securities Exchange (ASX); Garrat Learning, Governance Institute of Australia; The Ethics Centre, HR Institute, Nasdaq.
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