This is a service specifically targeted at the needs of busy non-executive Directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

In this edition, we consider the Third Australian National Whistleblowing Symposium, the ICC consultation report to establish a standardized sustainable trade and finance framework, the Panel’s reasons for decision relating to Gascoyne Resources Limited and updates in relation to Nex Metals Explorations Ltd as well as an insider trading conviction involving prison time. In Over the Horizon we consider potential issues for AGM’s in light of shareholder activists at Northern Star’s AGM.

This edition of Boardroom Brief is our last for 2021, as we take a brief hiatus over the Christmas break, returning in February 2022.

GOVERNANCE & REGULATION

Third Australian National Whistleblowing Symposium. On 11 November 2021, Australia’s Third National Whistleblowing Symposium was held. ASIC Commissioner, Sean Hughes reported that since the whistleblower protection regime was enacted in 2019, whistleblower reports have increased by 194%. During the previous financial year, ASIC reviewed over 100 whistleblower policies and noted incomplete or inaccurate information, out of date policies and policies without oversight arrangements were common. These findings are consistent with previous trends noted by ASIC in its open letter to CEOs of public companies, large proprietary companies and trustees of registerable superannuation entitles, which urged them to review their whistleblower policies to ensure legal compliance. See a previous edition of Boardroom Brief for further details.

ICC publishes report with view to standardise sustainable trade and finance framework. The International Chamber of Commerce (ICC) has developed a report in collaboration with BCG which seeks to open consultation on a standardised framework and assessment methodology for sustainable trade and finance. The ICC and BCG note the inability of existing frameworks to adequately account for the complex and numerous interactions that can take place within a single trade finance transaction. The new framework is intended to provide sustainability grading inclusive of such complexities to provide a comprehensive but transparent system. See the ICC media release.

LEGAL

Takeovers Panel received application in relation to the affairs of Nex Metals Explorations Ltd. Following a string of applications and declarations discussed in previous editions of Boardroom Brief, Nex Metals Exploration Ltd (Nex Metals) has made an application to the Panel in relation to its own affairs. Nex Metals submitted that, following the making of a takeover bid by Metalicity Ltd (Metalicity), an agent of Metalicity engaged in conduct amounting to unacceptable circumstances by contravening the equal opportunity principle and collateral benefits rule. Nex Metals sought interim and final orders that Metalicity be prohibited from proceeding with its takeover bid. The Panel this morning declined to conduct proceedings in relation to the application because it considered insufficient material had been provided to support it conducting proceedings, and therefore no reasonable prospect it would make the declaration sought. See the Panel’s media release regarding the application, and the media release regarding its subsequent decision.

Takeovers Panel releases reasons for decision regarding Westgold Resources Limited’s application in relation to the affairs of Gascoyne Resources Limited. The Panel has released its reasons for its decision in relation to Gascoyne Resources Limited (Gascoyne) in Gascoyne Resources Limited [2021] ATP 10 which sets out its reasons for declining to make orders sought by Westgold Resources Limited. As discussed in previous editions of Boardroom Brief, Westgold submitted, among other things, that the absence of a termination right in favour of Gascoyne in the event a superior proposal is made was unacceptable. However, Gascoyne’s board unanimously agreed that Westgold’s offer was not a superior proposal within the meaning of the scheme implementation deed (SID). The Panel confirmed in its reasons this determination precluded further examination of the circumstances. The Panel expressed concern in its reasons that should a Superior Proposal be made, Gascoyne was unable to terminate the SID, only Firefly as the incoming merger could do so, which “had the potential to impact the ability of a rival bidder…to be successful”. While the series of applications were ultimately fruitless, the scenario serves as a useful reminder for parties to carefully consider the drafting of SIDs as they relate to triggers, conditions and termination rights, ensuring such drafting is capable of practicable exercise in reality.

Former executive sentenced and fined for insider trading. A former executive of a private company, Healthe Care Pty Ltd (Healthe Care) has been found guilty of insider trading with respect to ASX-listed Pulse Health Limited (Pulse), and has been sentenced to 12 months imprisonment (to be released immediately upon payment of $10,000), fined $10,000 and made to pay a pecuniary penalty of $31,996 representing profits made as a result of the breach. The former executive had received information from another member of the executive team about a potential deal, which he took to mean that Healthe Care would acquire a substantial shareholding in Pulse. He then purchased shares in Pulse a day before Pulse entered into a trading halt and announced that it had received a non-binding indicative offer for Healthe Care to acquire all of its shares. When trading resumed, the former executive sold all of his shares in Pulse, making a profit of $31,996. ASIC Deputy Chair, Sarah Court reminded that “ASIC will continue to take action against insider trading wherever it occurs to ensure Australia’s financial markets are fair and promote investor confidence”. See ASIC's media release.

OVER THE HORIZON

Shareholder activism in AGM season. AGM season has arrived and so too have shareholder activists. The term “shareholder activism” generally refers to the exercise of rights by shareholders in an attempt to influence the strategy, governance or performance of their company. AGMs provide a prime opportunity for these shareholders to speak up and put pressure on companies in a public forum. The Northern Star Resources Limited AGM held last week was a timely reminder of this, where the Chairman tackled 13 questions from an individual shareholder activist. Directors, and in particular, Chairs of upcoming AGMs should be prepared to respond to difficult questions from shareholders at these meetings. To prepare for this, Directors should evaluate the company’s strategic position through the eyes of an activist, including by being aware of potential pressure points or shortcomings of the company over the past financial year, especially in an ESG sense. Handled correctly, shareholder activism at AGMs can serve as an opportunity for companies to effectively and publicly address areas of concern, and also gather intelligence on activists’ priorities. If you would like further information or an AGM preparedness game plan, reach out to our team.