Government consults on proposed dividend changes and red tape reduction measures
The Federal Government has issued an Exposure Draft Bill which seeks to clarify some of the confusion arising out of the 2010 reforms to the dividend payment test, imposes some additional remuneration reporting requirements, abolishes the ‘100 members’ rule for requisitioning company meetings and proposes other measures designed to cut red tape and reduce compliance costs for businesses. We will continue to monitor the progress of the Bill. On 10 April 2014, the Federal Government issued its exposure draft Corporations Legislation Amendment (Deregulatory and Other Measures) Bill (Bill) and some accompanying Explanatory Material.
One of the key features of the Bill is the proposed clarification of the dividend payment test by:
- replacing the current 3 limb balance sheet test in section 254T of the Corporations Act 2001 (Cth) with a pure solvency test;
- confirming that for companies which resolve to pay dividends rather than declaring them, the relevant time at which the test must be applied is immediately before payment of the dividend;
- making clear that share capital can be reduced by dividend payments (without shareholder approval) by exempting them from the capital maintenance provisions in Part 2J to the extent that they are “equal reductions”; and.
- imposing additional reporting obligations for dividends paid other than out of profits.
Other reforms proposed in the Bill include:
- removing the obligation to hold a general meeting on the request of 100 shareholders;
- requiring a company to include a general description of their remuneration governance framework (to the extent it is not included elsewhere in the company’s annual report) and replacing the requirement to disclose the value of options granted to key management personnel with a requirement to disclose the number of lapsed options and the year in which they were granted;
- relieving certain disclosing entities from the obligation to prepare a remuneration report and exempting certain companies limited by guarantee from the need to appoint or maintain an auditor;
- transferring the remuneration setting responsibility for the offices of the Financial Reporting Council, Australian Accounting Standards Board and the Auditing and Assurance Standards Board to the Remuneration Tribunal;
- improving the efficiency of the Takeovers Panel by allowing the Panel to perform its functions while overseas; and
- clarifying that directors may vary their financial year by up to 7 days, regardless of the length of the previous years (a minor technical amendment).
Submission on the Bill were due by 16 May 2014, with the Bill expected to be introduced in the 2014 Autumn/Winter Sittings of Parliament. See the media release dated 10 April 2014.