Inquiry into Director Identification Numbers
On 14 February 2019, the Senate referred the Commonwealth Registers Bill 2019 and four related bills – including the introduction of the Director Identification Numbers – to the Economics Legislation Committee for inquiry. The Bill has lapsed and would need to be reintroduced into parliament for it to become law.
APRA reports on industry self-assessments
The Australian Prudential Regulation Authority (APRA) wrote to 36 of the country’s largest banks, insurers and superannuation licensees last year and asked them to self-assess whether the issues uncovered by the CBA prudential inquiry also existed in their companies. It then carried out a detailed analysis of the reports, noting a wide variation in their quality. Consistent findings in the self-assessments included:
Corporate Governance Principles and Recommendations, 4th Edition (2019)
The latest version of the ASX Corporate Governance Principles and Recommendations (4th Edition) was released in February and will take effect for a listed entity’s first full financial year commencing on or after 1 January 2020. The new edition contains 35 recommendations but retains the “if not, why not?” principle. Mertons will provide an in-depth insight into the changes and what they mean to companies later this month. If you prefer to read the full document, it’s available here.
ASX listing rules changes deferred
ASIC was not able to process the rule changes proposed in ASX’s consultation paper simplifying, clarifying and enhancing the integrity and efficiency of the ASX Listing Rules in time for them to come into effect on the originally proposed implementation date of 1 July 2019. Consequently, ASX has decided to defer the implementation date for those changes to 1 December 2019, to give listed entities the opportunity to complete their AGMs for 2019 before having to absorb the rule and guidance changes.
Continuous disclosure – naming counterparties to material transactions
ASX continues to identify instances where listed entities have announced a material transaction without disclosing the identity of the other party or parties to the transaction. If a transaction is sufficiently material to warrant disclosure under Listing Rule 3.1, the identity of the other party or parties will itself be material information that must also be disclosed.
Where there is little or no information about the other party or parties in the public domain (for example, a private company), the announcement should also include a summary of the due diligence undertaken by the listed entity on their financial and other capacity to perform their obligations in relation to the transaction.
“If ASX finds instances where a listed entity has not disclosed an appropriate level of information about the other party or parties to a material transaction, ASX will not hesitate to suspend trading in the entity’s securities until the information has been released to the market.” Read more.
ASIC announces major financial reporting changes and focuses
ASIC has called on companies to focus on the requirements of new accounting standards, which can materially affect reported assets, liabilities and profits. Full-year reports at 30 June 2019 must comply with new accounting standards on revenue recognition and financial instrument values (including loan loss provisioning), leases, and new definitions and recognition of criteria for assets, income and expenses. Directors are primarily responsible for the quality of the financial report. Read more.
Strengthening of work, health and safety laws
A strengthening of work, health and safety (WHS) laws is likely following the review into the operation of current laws carried out by Marie Boland (former Executive Director of SafeWork SA). The report, released in February 2019, proposes 34 amendments to the model WHS laws.
Many of the recommendations aim to enhance consistent application and enforcement of the model WHS laws across jurisdictions and to remove complexity where possible. Key recommendations include:
SafeWork Australia is seeking feedback on the impacts of implementing the recommendations by 5 August 2019.
Whistleblower Protections Enhancements
The new Enhancing Whistleblower Protections Act 2019 came into effect on 1 July 2019. All companies are covered by the new legislation and some are specifically required to have a whistleblower policy in place by 1 January 2020. Read our earlier Mertons’ governance insight into what the new legislation means to you.
Modern Slavery Act
The Modern Slavery Act 2018 (Cth) requires organisations conducting business in Australia with annual consolidated revenue of $100 million or more, to report annually on the risk of modern slavery in their operations and supply chains and what they are doing to address those risks. They will need to file an annual Modern Slavery Statement. Read Mertons’ governance insight into what you need to do in order to comply with the new requirements.
Amendments to the Corporations Act 2001 make it an offence for a director, officer or employee to use their position or information gained due to their position dishonestly with the intention of gaining advantage. It’s an offence if a director or officer was reckless, dishonest (note the removal of ‘intentionally dishonest’) and failed to exercise their powers and discharge their duties in good faith and in the best interests of the company or for a proper purpose. Maximum prison term has tripled from 5 to 15 years.
There have also been changes to the Director Penalty Notice for director’s personal liability for unpaid superannuation.
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.
Disclaimer: Mertons Corporate Snapshot is only intended to provide a general overview on matters of interest. It is not intended to be comprehensive and is not legal advice. We attempt to ensure that content is current but we do not guarantee its currency. You should seek legal and/or professional advice before acting or relying on any content.