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 further extension of laws permitting electronic execution by companies, the Treasury’s consultation on financial reporting for charities and with respect to the AFCA as well as a new immunity policy for market misconduct offences. We consider the impacts of a Panel decision not to make a declaration of unacceptable circumstances due to the passage of time, and a WA Supreme Court decision on the impact of email correspondence on an existing formal agreement. We also look ahead to the impact of COVID-19 recovery through vaccinations on investment activity.

GOVERNANCE & REGULATION

Government proposes amendments to temporarily permit electronic execution of documents. The concept of “business as usual” has changed over the past year – in many ways for the better, especially as regulators have been forced to turn their minds to ways in which compliance burdens can be alleviated in lieu of more practical ways of doing things. One of the measures introduced in 2020 was the temporary amendment to the Corporations Act which allowed companies to execute documents (including deeds) electronically. This measure was due to expire on 21 March 2021, but is now proposed to be extended to 15 September 2021. While not yet there, the ongoing extension of these measures provides hope they will become permanent. See our article on the practicalities of electronic execution under the current temporary regime.

Treasury consults on increasing harmonised financial reporting thresholds for charities. Directors of charitable corporations will need to familiarise themselves with current and proposed reforms stemming from the statutory review of the Australian Charities and Not-for-profits Commission Act (Cth) 2012. On 22 February, the Treasury commenced a consultation process for the implementation of a framework for increasing harmonised financial reporting thresholds for ACNC registered charities. The consultation paper released provides a useful snapshot of the current regulatory arrangements, outlines the proposes new thresholds and sets out key issues for consideration during this consultation process. The working group is seeking stakeholder feedback on items flagged in the consultation paper by Sunday, 21 March 2021. See the Treasury’s release.

Treasury commences evaluation of the Australian Financial Complaints Authority. To top off a busy Q3 for the Treasury, it has also announced that it is commencing an independent review of the operation of the Australian Financial Complaints Authority (AFCA). This review is the first of its kind for AFCA, which has served a comprehensive role in financial complaints since its inception in 2018. The Treasury will report its findings to the Minister for Superannuation, Financial Services and the Digital Economy by 30 June 2021. Until this time, all interested parties may make submissions. After such a long period without review, it is likely that we will see some important and, in some instances, long-awaited changes to AFCA’s role, including the potential for an internal review mechanism. See Treasury’s review page and consultation page.

LEGAL

ASIC launches immunity policy for market misconduct offences. ASIC has released an immunity policy for certain breaches of the Corporations Act. Under this policy, an individual who has manipulated the market, committed insider trading or engaged in dishonest conduct when operating a financial services business can, in particular circumstances, seek immunity from both civil penalty and criminal proceedings. This policy is aimed to assist ASIC in efficiently identifying and taking enforcement action against specific markets and financial services breaches of the law. Applications for immunity under the policy will only be available for individuals and not corporations, and will only be available to the first individual who satisfies the immunity criteria and reports the misconduct to ASIC prior to commencement of an investigation into the conduct. ASIC has emphasised that individuals who do not meet the necessary criteria are still encouraged to cooperate with ASIC and will be given due credit for any such cooperation. See ASIC’s media release.

Panel decision reminds of the importance of timely applications. The Panel has released reasons for its decision not to make a declaration of unacceptable circumstances in the case of Webcentral Group Limited 03 [2021] ATP 4. The application by 5GN (a substantial shareholder of Webcentral) was made approximately two months after the close of a bid by 5GN for Webcentral, and was based (amongst other things) on Webcentral’s failure to disclose a success fee in bid documentation. The Panel noted that this issue of non-disclosure was of sufficient seriousness that it was initially inclined to make a declaration of unacceptable circumstances. However, given the passage of time between the close of the bid and the date of the application, it was unclear to the Panel that any unacceptable circumstances could be remedied by appropriate orders. This decision reminds that timely action must be taken to apply to the Panel for a declaration of unacceptable circumstances, and given the practical restrictions of the orders which can be made, applications cannot be made as a last ditch effort.

Court clarifies the construction of commercial agreements where the parties’ intentions may have changed. The WA Supreme Court has rejected Platina Resources Ltd’s claim against Artemis Resources Ltd in [2021] WASC 42, by finding that Artemis and its subsidiaries did not breach a heads of agreement. The key issue was whether email correspondence was sufficient to justify a formal agreement supporting the nomination of one of Artemis’ subsidiaries as a party to an existing heads of agreement. The Court noted that accepting that the parties intended a commercial result does not justify the Court in rewriting the contract which it believes the parties would have agreed. In this instance, the Court considered the email correspondence was intended to be a temporary position pending the negotiation of a formal agreement. This case serves as a reminder for parties with existing agreements to formalise any necessary amendments to those agreements (particularly if material) to ensure their intentions are appropriately captured and enforceable.

OVER THE HORIZON

The start of vaccinations and the end of high valuations? Vaccinations have long been pinned as the key to enduring recovery from COVID-19 on a global scale. As vaccinations are now being rapidly rolled out, speculation about the impact of recovery on the market is also growing rapidly, particularly in the UK and USA, where recovery will likely look extremely very different to Australia (for example, as their citizens emerge from prolonged lockdown). As this is occurring, Government stimulus packages throughout these nations will begin to come to an end, excess savings will drop, and demand will likely increase. As demonstrated by last week’s New Zealand Reserve Bank’s mandate change, it is possible that Governments will turn their attention to addressing the unintended consequence of fiscal stimulus - including decreasing housing affordability. How this plays out in the polic space remains to be seen.