On 22 October 2014, the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 (Cth) (Bill) was introduced into Federal Parliament.
The Bill is designed to reduce the compliance burden and unnecessary regulation for companies. Two of the more significant measures are:
- the removal of the obligation on directors to call a general meeting at the request of only 100 shareholders (100 Member Rule); and
- removing the obligation on unlisted disclosing companies to prepare remuneration reports.
100 Member Rule
The Corporations Act 2001 (Cth) (Act) section 249D currently provides that the directors of a company must hold a general meeting at the request of 100 members entitled to vote at the annual general meeting. If the Bill is enacted into law, the 100 Member Rule will be abolished. As a consequence, only members holding 5% of the voting shares will be allowed to request a general meeting.
In terms of the disclosure of remuneration, there are two key changes the Bill proposes.
- unlisted disclosing companies will no longer be required to produce remuneration reports at all.
- there are changes to the disclosure requirements for listed companies, including the removal of information which may be of limited use or value to shareholders would not be required in a company’s remuneration report.
Specifically, companies will no longer be required to disclose the value of options held by executive personnel that have lapsed during the financial year but companies will still be required to disclose the number of lapsed options. Furthermore, the company will not be required to report and disclose the percentage value of the options to reflect of an individual’s total remuneration.
Dividend Payments Test
The exposure draft which was released on 10 April 2014 included changes to the test for when a company can pay dividends under section 245T of the Act. These proposed amendments have not been included in the Bill. Therefore the current requirement to enable dividends to be declared will remain.
The Bill has proposed other reforms including:
- clarifying the financial year. There is confusion about the conditions under which directors may determine that a financial year is shorter than 12 months. Directors may vary financial year by up to 7 days, regardless of the length of the previous financial years.
- certain companies limited by guarantee will no longer required to appoint or retain an auditor where they are not required to undertake an audit.
- the Takeovers Panel (President) may give a direction about the members who are to constitute the Panel while in Australia and overseas. Members of the Takeovers Panel may perform Panel functions while in Australia and overseas.
- shifting the remuneration setting responsibility to the Remuneration Tribunal from Financial Reporting Council, Australian Accounting Standards Board and the Auditing and Assurance Standards Board.
If the Bill is passed, the amendments discussed above will take effect for the financial year ending immediately after the commencement of the Bill. On 1 December 2014, the Bill was introduced to the Senate, read for first time, and second reading moved. To read the Bill for more information click here.