June 29, 2022

Mertons’ Corporate Snapshot – June 2022

ASIC Highlights Risk Areas for 30 June Reporting

In a climate of business uncertainty, ASIC is urging companies to be clear and forward-thinking in their 30 June reporting. Commissioner Sean Hughes has flagged that the regulator will focus on:

  • Asset values
  • Provisions
  • Solvency and going concern assessments
  • Events occurring after year end and before completing the financial report
  • Disclosures in the financial report and Operating and Financial Review (OFR)

In a recent media release, ASIC listed some risks that directors and management ought to consider, and pointed out that the construction industry, owners of commercial property and large carbon emitters are particularly exposed.

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ABRS Issues Further Reminder About Director IDs

As we’ve previously discussed, directors of Australian companies, registered bodies, registered foreign companies and Aboriginal and Torres Strait Islander corporations must now have their own individual Director ID. When people must apply for their director ID depends on when they first become a director:

  • Directors appointed before 1 November 2021 have until 30 November 2022 to apply;
  • New directors appointed for the first time between 1 November 2021 and 4 April 2022 had 28 days from their appointment to apply;
  • From 5 April 2022, intending new directors must apply before being appointed.

Non-compliance is a criminal offence, and penalties may apply. You can learn more about the scheme and the deadlines at the ABRS website.

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New Ruling Compels Financial Services Firms to Manage Cyber Risk

The Federal Court ruling in ASIC v RI Advice Group Pty Ltd (5 May 2022) found the defendant firm in breach of its Corporations Act obligations to do all things necessary to ensure financial services were provided efficiently and fairly, and to have adequate risk management systems in place.

The ruling is timely, as the Russia-Ukraine war has caused a significant increase in instances of cyber-attack.

This is the first time ASIC has used its enforcement powers in relation to a firm’s failure to protect itself and its clients against cyber risks, and it likely foreshadows increased enforcement activity in this area.

The defendant firm was ordered to pay ASIC’s costs, to engage a cyber security expert and to provide written reports to ASIC about its remedial measures.

The full text of the judgment is available here.

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AICD Director Sentiment Index Trends Down

The Institute’s regular survey of Australian directors revealed an overall fall of 7.1 points to +10.8, fuelled by factors such as cyber crime and data security, labour and skills shortages and the global economic climate (especially for listed company directors), and poor levels of board diversity.

Western Australia had the most positive director sentiment of the states. Interestingly, over 70% of company directors were in favour of the establishment of a federal anti-corruption body.

You can read the full results of the Index here.

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Director Penalty Notices Get New Teeth

The ATO can issue penalty notices (DPNs) to directors which equal the value of the company’s overdue SCG, PAYG or GST. Once served with a “non-lockdown” DPN (that is, where statements have been lodged but the liability not paid), a director has 21 days to pay or take other remedial action.

A recent Federal Court decision (Clifton v Kerry J Investment) established that entering into a payment arrangement does not cancel the “due and payable” status of a tax debt, thereby restricting the options available to a debtor under a “non-lockdown” DPN.

You can read more about the relationship between the ruling and DPNs here.

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Sources of information: Australian Securities & Investment Commission (ASIC), Australian Business Registry Services (ABRS), Allens Linklaters, Institute of Company Directors (AICD); Macpherson Kelley.

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.