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 ASIC’s latest Corporate Finance Update, ACCC’s cotinued flexible approach to aid COVID-19 recovery efforts, ASIC’s Corporate Plan for 2020-24 and the ALRC’s final report on corporate criminal responsibility.
YOUR KEY BOARDROOM BRIEF
ASIC releases its corporate finance update for September 2020. ASIC’s Corporate Finance Update covers fundraising, M&A and corporate governance matters. The Update provides a re-cap of the various temporary waivers and relief introduced to assist entities navigate COVID-19 challenges (including in relation to capital raisings, virtual meetings and electronic signing), the need to have a reasonable basis for forecasts or forward-looking statements in fundraising documents or market disclosures, guidance on the use of non-IFRS profit measures and ASIC’s new IPO escrow and advertising relief. In particular, the Update highlights a marked increase in capital raisings (with, between 20 March and 27 August 2020, 180 listed entities having sought to raise $36.3 billion of secondary capital, comparing favourably on an international basis) – most capital being raised through placements ($23.7 billion), with the remainder by entitlement offer ($8.1 billion) and share purchase plans ($4.5 billion). However, there has been a decrease in IPOs (198 prospectuses lodged from January to June 2020, down from from 307 in the previous period), as well as hybrid, capital note or other security offerings under a prospectus – reflecting also the popularity of ‘low doc’ capital raisings as companies have sought to manage the effects of COVID-19. M&A activity has been severely affected with only 15 control transactions (10 takeovers and five schemes) from January to June 2020 compared to 40 (16 takeovers and 24 schemes) from June to December 2019. However, while the volumes were lower, the value of transactions was greater ($14.43 billion compared to $9.02 billion). The report confirms Gilbert + Tobin’s own experience during the COVID-19 pandemic – liquidity is flooding the market, facilitating capital raising in most sectors, but M&A is challenging both logisically and as a result of growing bid-ask spreads in deals.
ACCC authorises supermarkets to continue cooperating in COVID-19 response. On the theme of COVID-19, regulators continue to take a supportive approach to aiding national recovery efforts. The ACCC has again authorised supermarket operators, including Coles, Woolworths, Metcash, Aldi and other approved grocery retailers, to continue cooperating to ensure supply of food and groceries in response to COVID-19. See ACCC’s media release.
ASIC releases its Corporate Plan for 2020-24. ASIC’s corporate plan is its primary planning document for identifying its focus areas over the short and medium term and explaining its strategy, regulatory approach and performance evaluation framework. Unsurprisingly, the theme of this year’s Corporate Plan is supporting the long-term recovery of the Australian economy. ASIC has confirmed its five strategic priorities for 2020-21 are: (i) protecting consumers from harm at a time of heightened vulnerability; (ii) maintaining financial system resilience and stability; (iii) supporting Australian businesses to respond to the effects of the COVID-19 pandemic; (iv) continuing to identify, disrupt and take enforcement action against the most harmful conduct; and (v) continuing to build its organisational capacity. Among ASIC’s priorities over the next four years are driving cultural change using its regulatory toolkit to deter poor behaviour, improving entities’ management of key risks and reducing misconduct of directors and professional service providers. See ASIC’s media release.
ALRC releases its final report on corporate criminal responsibility. The report of the Australian Law Reform Commission (ALRC) makes 20 recommendations (click here for a summary) to improve Australia's corporate criminal liability regime. Critically, it recommends that a new test for attributing conduct to corporations should be adopted to replace a range of existing statutory tests. That attribution model deals with attributing both the physical and mental elements of an offence. The report has held off for now on recommending proposals for individual liability, given other recent developments in this area. Other key recommendations include: (i) criminalising corporate systems of conduct or patterns of behaviour that result in multiple breaches of civil penalty provisions; (ii) support for the proposed new offence of failure to prevent foreign bribery; and (iii) the enactment of legislation to introduce deferred prosecution agreements. See also the ALRC’s media release.
THE WEEK AHEAD
Victorian pain, Federalism strain. Business in Victoria will spend this week digesting the implications of the Andrews Governments’ recovery roadmap delivered on Sunday evening. Current lockdown and curfew arrangements are among the toughest implemented in response to COVID-19 anywhere in the world (you can map the stringency of response of various countries using the Oxford University tracker here) and will be continued for a further two weeks with only minor modifications. Workers in the construction, manufacturing, logistics and childcare industries will be able to return to work at the end of September, assuming case numbers continue to fall, but Melbourne’s famously vibrant CBD is likely to remain a ghost town well into October. Meanwhile, the Western Australian Government has effectively been given leave to continue to enforce its hard border policies for the foreseeable future, subject to the outcome of Clive Palmer’s High Court challenge, now scheduled to be heard over two days in November. The fraying of national consensus on the response to COVID-19 will massively complicate the task of Federal Treasury Josh Frydenburg, who is due to hand down the 2020-2021 Budget - destined to be the most bizarre since Federation - on 6 October.