In brief

  • Recent changes to the Corporations Act 2001 and decisions favourable to ASIC have caused heightened anxiety amongst company directors, secretaries and general counsel.
  • At a Freehills presentation and panel discussion, WA ASIC Regional Commissioner, Bruce Dodd, provided insights into ASIC’s approach to enforcement and its focus over the next 12 months.
  • Commissioner Dodd and other panel members discussed other forthcoming changes and issues arising in corporate governance and regulation.

Following recent court decisions regarding corporate governance and the obligations of company officers, as well as ASIC releasing new guidance on its enforcement and supervisory roles, it is important for company directors, secretaries and legal counsel to be on top of their changing obligations and roles, especially as the 2012 AGM season approaches.

On 1 August 2012, Freehills hosted a panel discussion regarding recent corporate regulatory developments. The discussion focussed on those developments particularly affecting mid-cap mining companies. Giving an insider’s perspective was Bruce Dodd, WA Regional Commissioner and Senior Executive of Emerging Mining and Resources at ASIC. Also on the panel was Perth Litigation partner Elizabeth Macknay, and Perth Corporate partner Simon Reed. The panel was chaired by another Perth Litigation partner, Malcolm Cooke.

Commissioner Dodd identified ASIC’s stated priorities for 2012/2013 as ensuring:

  • investors and financial consumers are confident and informed,
  • financial markets are fair and efficient, and
  • registration and licensing is efficient.

These priorities inform ASIC’s policies and approach to regulation and enforcement. Commissioner Dodd referred particularly to the first priority, which provides a useful touchstone for officers and directors considering their regulatory obligations.

In particular, Commissioner Dodd spoke about:

  1. pending updates to the Joint Ore Reserves Committee code,
  2. ASIC’s intention to consult with market participants regarding the level of director disclosure and analysis required to company annual reports, with the aim of releasing further guidance in the next 6 months,
  3. ASIC’s approach to extending relief for the issuing of performance rights as part of incentive arrangements to include contractors, consultants and casual employees but not non-executive directors, and
  4. ASIC’s views in relation to continuous disclosure obligations.

The panel discussed ASIC’s recently released Information Sheets 151 and 152, which summarise ASIC’s policies and processes regarding both enforcement and the making of public comment. Commissioner Dodd noted that the Regulator’s expanding remit – which now covers, for example, the regulation of business names – means that its enforcement budget is increasingly stretched. Information Sheet 151 provides guidance to market participants regarding when ASIC will choose to investigate and enforce alleged regulatory breaches, and by what means. It was noted that ASIC is utilising infringement notices in lieu of prosecution in cases of alleged breaches of companies’ continuous disclosure obligations.

Simon Reed highlighted the increased attention that ASIC has been giving to change of control transactions, in particular ASIC’s revised guidance on downstream acquisitions.

The panel also discussed some of the key messages arising out of three recent actions against directors of major listed companies:

  • James Hardie: ASIC v Hellicar [2012] HCA 17 and Shafron v ASIC [2012] HCA 18,
  • FMG and Forrest: ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364, and
  • Centro: ASIC v Healey (2011) 196 FCR 291.

Elizabeth Macknay also spoke about the recent ‘two-strikes’ rule regarding executive remuneration. These provisions give shareholders the power to cause a board spill in situations where a sufficient number of voting shareholders at an AGM disapprove of the company’s remuneration report. If, at two consecutive AGMs, 25% of shareholders who vote are against the resolution on the company’s remuneration report, the company must hold a spill resolution. If this is passed, the company must hold a meeting within 90 days, at which the board must stand for reappointment. Elizabeth noted that companies that received a ‘strike’ at their last AGM will need to be conscious of this eventuality, and plan accordingly.