Schedule 2 of the Treasury Laws Amendment (Modernisation and Other Measures) Act 2020 introduces a new requirement for directors or alternate directors of companies or bodies corporate registered under either the Corporations Act 2001 (Cth) (Corporations Act) or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act) to hold a 'director identification number' or DIN. The change is part of the government's Modernising Business Registers Program (summarised here). What is a DIN? A DIN is a unique 15 digit numerical identifier that will be assigned to each eligible director (upon a one-off application by the director) as proof of their identity. Directors will then keep their DIN regardless of whether they change companies, change their name, cease to be a director or move interstate/overseas. This will make it easier to trace directors' relationships with companies over time. The primary aim of the new requirement is to make it easier to track unlawful activity, including phoenix activity, though it's also expected that it will have other benefits. For example: it is expected to reduce time/cost for administrators and liquidators by making it simpler to track directors and their corporate history. Who needs a DIN? Directors (or alternate directors acting that capacity) will need to apply for a DIN if they are a director of either: ▪ a company, a registered Australian body or a registered foreign company under the Corporations Act; or ▪ an Aboriginal and Torres Strait Islander corporation registered under the CATSI Act What action do directors need to take now? The DIN application process will not be open until November 2021 at which point existing eligible directors, and those who wish to apply before their appointment, will be able to submit their application. For now, the Australian Business Registry Services (public beta) website (ABRS website) suggests that directors set up their myGovID if they have not already done so in preparation for making an application. DIN application deadlines An instrument - Corporations (Director Identification Numbers—Transitional Application Period) Instrument 2021 – specifying the deadlines by which existing and future directors will need to have applied for a DIN was registered on 5 October 2021. The deadline for submitting a DIN application differs according to the date at which directors were appointed. The explanatory statement accompanying the instrument specifies that these deadlines have been set to allow time for the new system to be properly tested and to allow sufficient time for eligible directors to submit their applications. The ABRS website provides further detail on these deadlines. In summary: Existing directors ▪ Eligible persons under the Corporations Act who are existing directors or who are appointed as a director on/before 31 October 2021 will have until 30 November 2022 to apply. Governance News | Weekly wrap up of key financial services, governance, regulatory, risk and ESG developments. Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 5 ME_183543315_1 ▪ Eligible persons under the CATSI Act who are existing directors or who are appointed on or before 31 October 2022 will have until 30 November 2023 to apply. New directors ▪ Eligible persons under the Corporations Act who are: – appointed as a director between 1 November 2021 and 4 April 2022 will need to apply for a DIN within 28 days of their appointment as a director – appointed as a director from 5 April 2022 will need to apply for a DIN prior to their appointment. ▪ Eligible persons under the CATSI Act who are appointed as directors from 1 November 2022 will need to have applied for a DIN prior to their appointment. The application process Directors are required to apply for their DIN themselves because they will need to verify their identity. Directors will be able to apply online, over the phone or in 'paper form'. Details about the process are available on the ABRS website. Penalties for noncompliance Eligible directors who fail to meet their DIN obligations could be issued with an infringement notice or face civil or criminal penalties. Extensions Directors who are unable to apply by the relevant deadline will be able to apply for an extension. Information about how to make an extension application is not yet available but will be published on the ABRS website in November 2021. Governance News | Weekly wrap up of key financial services, governance, regulatory, risk and ESG developments. Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 6 ME_183543315_1 Diversity International study finds Australia is lagging other countries on closing the gender pay gap, ANU recommends three changes ▪ An international report has compared and ranked the gender pay gap reporting frameworks in six countries: Australia, France, South Africa, Spain, Sweden and the United Kingdom. ▪ The research, published by the Global Institute for Women's Leadership at King's College London and the Australian National University (ANU), identified 11 indicators of best practice reporting, including: accountability, coverage, enforcement and penalties, intersectional elements (the extent to which data is collected on additional aspects of diversity beyond gender) and action plans. ▪ The report ranks Australia equal last with the UK across the 11 indicators with a score of 4 out of 11. One area where Australia lags other jurisdictions is the lack of requirements for employers to take action to address gender pay gaps eg there is no requirement for Australian organisations to create/execute action plans and/or to report on outcomes. ▪ The top ranked nation with a score of 8.5 was Spain, followed by France on 8. ▪ Separately, the ANU has released a companion report which recommends three actions to address the gaps identified in Australia's current approach. These are: – Publication of organisation-level gender pay gap data – Mandating minimum corrective actions to address the gap (this could be achieved through setting minimum standards designed to achieve rolling average reductions in the gender pay gap) – Enacting sanctions for non-compliance eg make eligibility for government contracts and financial assistance such as Commonwealth grants contingent on compliance The report also recommends consultation on existing reporting requirements with a view to both streamlining requirements/reducing the reporting burden for organisations and enabling collection of intersectional data (as opposed to limiting data collection to gender-related data only) [Sources: ANU media release 01/10/2021; Full text report: Bridging the Gap; Full text ANU report: Gender Pay Gap Reporting in Australia] In Brief | Cranfield's latest annual Female FTSE Board Report tracking board gender diversity at FTSE100 and FTSE250 companies finds that while the Hampton-Alexander minimum female board representation target of 33% has been met in aggregate, 21% of FTSE 100 boards and 32% of FTSE 250 boards have yet to reach it. The report suggests that this calls into question whether it is appropriate to consider the introduction of mandatory targets [Sources: Female FTSE Board Report 2021] Governance News | Weekly wrap up of key financial services, governance, regulatory, risk and ESG developments. Disclaimer: This update does not constitute legal advice and is not to be relied upon for any purposes MinterEllison | 7 ME_183543315_1 Shareholder Activism SEC changes shareholder voting rules, CII says the changes will unfairly 'muzzle' smaller shareholders, files amicus brief in support of the lawsuit challenging the amendments The Securities and Exchange Commission (SEC) adopted amendments to Exchange Act Rule 14a-8, the shareholderproposal rule on 23 September 2021. Among other things the changes lift the existing ownership threshold required for shareholders to file and/or resubmit shareholder proposals. Key changes Currently shareholders need to have a minimum $2000 holding or 1% of a company's securities for at least one year. Under the changes shareholders will need to demonstrate continuous ownership of either: ▪ $2,000 of the company's securities for at least three years; or ▪ $15,000 of the company's securities for at least two years; or ▪ $25,000 of the company's securities for at least one year. The changes prohibit the aggregation of holdings for the purposes of satisfying these amended ownership thresholds. The changes also raise the minimum level of shareholder support required for a proposal to be eligible for resubmission at future shareholder meetings of the same. For example, a proposal that has been voted on three times within the last five years currently needs to secure at least 10% support in order to be eligible for resubmission at future meetings of the same company. Under the changes, the proposal would need to secure at least 25% support. The final amendments will apply to any proposal submitted for an annual or special meeting to be held on or after 1 January 2022 though there is a transitional period that will allow shareholders meeting specified conditions to rely on the $2,000/one-year ownership threshold for proposals submitted for an annual or special meeting to be held prior to 1 January 2023. Investor opposition to the changes The Council of Institutional Investors (CII) has issued a statement that is highly critical of the changes which the CII considers will operate to 'deprive many shareholders of the right to submit proposals to be voted on at US public companies'. The CII is not alone in raising concerns. A number of groups (including CII) have previously written to the regulator arguing that the amendments should not go forward. The CII has also filed an amicus brief in support of the complaint brought by the Interfaith Center on Corporate Responsibility, James McRitchie, and As You Sow in the District Court for the District of Columbia against the SEC, which alleges that changes to the shareholder proposal rules are 'unlawful under the Administrative Procedure Act and contrary to the Commission's role as "investor advocate"'