In conjunction with the release of the third edition ASX Corporate Governance Council Principles and Recommendations, various governance-related amendments were made to the ASX Listing Rules, which also came into effect on 1 July 2014.
Corporate governance statements and Appendix 4G checklist
A number of the amendments to the Listing Rules were made to implement and complement the reforms in the third edition Principles and Recommendations (read more in our update), including the new requirement for listed entities to lodge with ASX an Appendix 4G, which acts both as a checklist of the entity’s compliance (on an ‘if not, why not’ basis’) against the Principles and Recommendations and to direct investors to where corporate governance disclosures can be found.
The amendments permit the company to either include its Corporate Governance Statement in its annual report or include the URL where the Corporate Governance Statement can be found (a copy must still be provided to ASX when the annual report is lodged with ASX).
Securities issued to directors
The most common item of special business at AGMs in the ASX 100 relates to approvals for issues of securities to directors.
The general position is that shareholder approval is not required for securities purchased on market for the purposes of employee incentive schemes. The amended Listing Rules:
- introduce a requirement for a one-off annual disclosure of all on market purchases of securities under an employee incentive scheme; and
- provide that shareholder approval is not required under Listing Rule 10.14 where an employee incentive scheme for the issue of options or other rights to acquire securities, where the securities to be acquired on the exercise of the option or in satisfaction of the rights are required by the terms of the scheme to be purchased on market.
ASX has confirmed that where an entity has discretion to issue new securities or purchase them on market, then the entity must obtain security holder approval at the time of grant of the option or right. ASX does not consider it appropriate to defer security holder approval until the entity has made a decision that it will satisfy the holder’s entitlement by issuing new securities, rather than acquiring them on market.
Other amendments to the Listing Rules include:
- amendments to certain proxy form requirements, including the removal of the requirement for a ‘Chairman’s box’ and a statement of intentions and discretions for how the Chair will vote undirected proxies;
- clarifications to the meaning of ‘directors’ fees’ in Listing Rule 10.17;
- clarifications to the scope of the rights issue exceptions in Listing Rules 7.2 and 10.12; and
- amendment to the definition of ‘associate’ in Listing Rule 19.12, whereby ‘related parties’ are now deemed to be the ‘associates’ of directors and officers unless the contrary can be established.