Newsletter: September 2015

Mertons' Corporate Update - September Quarter 2015

Mertons’ Corporate Update – September Quarter 2015

Mertons’ Corporate Update is intended to provide you with an overview of corporate governance matters, including regulatory changes, trends and other issues that are important for your business

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Senate passes employee share scheme laws

The Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 took effect from 1 July 2015. Previously, options were taxed when vested to the employee, meaning that employees were hit with a substantial tax liability upfront. The change to the legislation means that the tax on the options can be deferred for up to 15 years or until the option is converted to a share, when the value can be easily calculated.

Critics have pointed out that the tax breaks are only for small start-ups, and that listed companies, those with turnover in excess of $50 million or those that have been incorporated for more than 10 years are specifically excluded.    

Directors’ identity number on the cards

The Australian Government has asked the Productivity Commission to undertake a public inquiry into barriers to setting up, transferring and closing a business and identify options for reducing barriers where appropriate.

One of the proposals to come out of this inquiry is to introduce a director identity number (DIN). Many support the move, but suggest that the number should replace personal details, including directors' places and dates of birth and residential addresses on ASIC's public register. 

Download the report.

Not for profits board’s financial literacy report

A recent study carried out by Grant Thornton and Pro Bono Australia revealed that a majority of not-for-profit (NFP) directors do not have the financial literacy skills to meet the challenges of the future.

Two clear themes emerged from the analysis of the survey responses:

  • When asked whether they believed their board had the right level of financial literacy to meet the current needs of their organisations, 59% believed they did. While this level could be improved on, of real concern is that when respondents were asked the same question in relation to future needs, only 40% believed their boards had the right skills. The reality is that the sector changes underway won’t be reversed and organisations must ensure they are equipped to manage them.
  • The survey indicated that one of the tools organisations can use to bridge the knowledge gap is director education. Analysis of the responses showed that where there was a focus on director education, the level of financial literacy was assessed by respondents as higher than average.

Areas found to improve director financial literacy, and therefore areas that Not for Profit boards could focus on included:

  • Evaluation of financial literacy during the director selection stage.
  • Including financial training in director induction programs.
  • Evaluations that assess board needs.
  • Ongoing director education programs.

Download the report.

Contact Mertons if you are a not for profit wanting help to review board skills and need for training.

Not for profit super funds fighting to retain existing board structure

In late June, the assistant treasurer Josh Frydenberg announced that the government would mandate superannuation funds to have one third of their boards made up of independent directors, including an independent chair. This would be a big change from the current model of ‘equal representation’ of employers and employees on the board.

Assistant Treasurer Josh Frydenberg introduced the Trustee Governance Bill to the House of Representatives on 16 September.

Not for profit super groups are staunchly opposed to the changes and point out that not for profit super funds have outperformed for profit funds over the last decade.

Supporters of the Bill point out that the change is not about profits, but about improving the governance of super funds.

Despite the opposition, it is expected that the Bill will pass.

Download Industry Super Australia position paper; Download the Bill and explanatory memoranda.

Contact Mertons for to arrange a performance review for your company’s board.

Gender diversity target 50% by 2020

The Tasmanian Government is committed to a target of 50 per cent representation of women across government boards and committees by July 2020 and had released the Women on Boards Strategy 2015-20: A Five-Year Plan for Improving Gender Equity on Tasmanian Government Boards and Committees. The Women on Boards Strategy places a stronger emphasis and greater accountability on the Tasmanian Government and the Tasmanian State Service to lead by example by appointing more women into board positions.

Actions contained within the strategy aimed at increasing the number of women on government boards include:

  • From July 2015, all new boards and committees will have a target of 50 per cent representation of women.
  • From July 2015, appointments to all existing boards will need to factor in the target of 50 per cent representation of women as vacancies fall due and new members are recruited to fill them.
  • The Government will establish a member-only group on the social networking site LinkedIn. Women and men will be invited to join the group to receive advice about board vacancies, information about training and development, and invitations to attend networking events.

The Government will contribute up to $50,000 per year for three years towards the cost of scholarships for women to undertake training through the Australian Institute of Company Directors, including the Company Directors Course and Foundations of Directorship course. The department of premier and cabinet will develop guidelines for the administration of the scholarship funding.

Download the report.

 Mertons can help you put in place suitable gender equality policies.


ASIC Capability Review

The government has commissioned a review to consider the capabilities of the Australian Securities and Investments Commission (ASIC), to test if ASIC has the appropriate governance, capabilities and systems to meet its objectives of ensuring that investors and consumers can have confidence in Australia’s financial system, as well as future regulatory challenges. The review follows recommendations from David Murray's Financial System Inquiry report, released in late 2014, which advocated a review of the capability of all major regulators every three to five years.  Under the terms of reference, the capability review may examine, and make recommendations on how efficiently and effectively ASIC operates to achieve its strategic objectives, including:

  • identification and analysis of immediate and forward-looking priorities or risks;
  • resource prioritisation and responsiveness to emerging issues, including:
    • how ASIC allocates its current resources among its regulatory tools, such as supervision, surveillance, education, policy, enforcement and litigation; and
    • how ASIC allocates its current resources across its regulated population;
    • the skills, capabilities and culture of the Commission and its staff, including in respect of internal review and improvement mechanisms; and
    • organisational governance and accountability arrangements.

The capability review should have regard to how comparable international regulators operate and relevant legislation, including the Public Governance, Performance and Accountability Act 2013.

The review is to be completed by the end of 2015.

Regulatory Guide 128 – Collective action by investors

ASIC has released RG 128 for investors who wish to cooperate with each other in relation to their investment in a listed company or managed investment scheme.

It provides guidance to promote investor engagement on corporate governance issues. It also identifies circumstances where acting together may lead to investors becoming associates or entering into a relevant agreement for the purposes of the takeover and substantial holding provisions of the Corporations Act 2001 (Corporations Act).

Download the guide.

ASIC’s focus for 2015-16

ASIC has recently released its Corporate Plan 2015–16 to 2018–19, which includes key focus areas for 2015-16. In the plan, ASIC identifies its long-term challenges that shape our outlook and strategy for the next four years as:

  • balancing a free market-based system with investor and financial consumer protection, with a focus on ensuring the culture and conduct of financial system participants emphasises the interests of their customers first  
  • digital disruption to existing business models and channels
  • structural change in our financial system through growth of market-based financing, which is largely driven by growth in superannuation
  • financial innovation-driven complexity in products and markets, and
  • the impact of globalisation on financial markets and products.

The Corporate Plan also discusses ASIC’s response to these challenges. In addition, it highlights the areas of focus for the FY 2015-16. These include particular risks around poor gatekeeper culture and conduct in the following areas:

  • responsible entities
  • lenders
  • markets, and
  • directors, auditors and insolvency practitioners.

The C states: “Culture and incentives are key drivers of the behaviour of the gatekeepers in our system. Our attention to these areas in the coming year will ensure we achieve the right balance of investor and consumer protection in our free market-based system”.

Download the plan.

ASX News

ASX facilitates dual listings by NZX listed companies

ASX has finalised amendments to its listing rules so that companies listed or listing on the Main Board of NZX can fall within the 'Foreign Exempt Listing' category under the ASX listing rules. The amendments are expected to come into effect on or before 9 September 2015. Admission to the official list of ASX as a foreign exempt entity significantly reduces both the initial and ongoing compliance burden and expense for dual listed NZ companies. Such companies will generally not have to prepare an Australian prospectus or information memorandum in order to list on ASX; and not have to comply with two sets of (often conflicting and unnecessarily duplicative) listing rules.

Download the ASX report.

Continuous disclosure guide

ASX has published the ‘Abridged Guide to Continuous Disclosure, to assist listed entities and their officers to understand and comply with their continuous disclosure obligations under the Listing Rules.  Download the guide.

Following a period of consultation earlier in the year, the ASX has also released the final version of Guidance Note 8 Continuous Disclosure Listing Rules 3.1-31B. The amendment expands guidance on earnings surprises, publication of analyst forecasts and consensus estimates, and investor briefings. Download Guidance Note 8.

Mertons can assist you in ensuring compliance with all ASX reporting requirements.

T+2 update

ASX is preparing to shorten the time for settling trades from "T+3" (the third business day after the trade) to "T+2" (the second business day after the trade) commencing March 2016. ASX online forms have been amended such that if a listed entity prepares and submits a corporate action with a Record Date falling on or after 9 March 2016, the ex period (inclusive of the Ex-Date and the Record Date) will be automatically calculated as 2 days rather than 3 days. Some other timetable changes have also been made to tie in with the transition to T+2. The proposed transition weekend from T+3 to T+2 is 5 and 6 March 2016.

ASX has published an industry readiness guide for stakeholders including share registries and issuers which is available to download along with other information at

Lodging your notice of meeting for your AGM with ASX

Listed entities must hold their AGMs within 5 months of their financial year end. As almost 90% of ASX's listed entities have a balance date of 30 June, the deadline for holding the AGM is 30 November.  Under listing rule 15.1.7, draft notices of general meeting that contain resolutions for Listing Rules purposes must be submitted to ASX for review before they are sent to security holders. It can take up to 5 business days for the ASX to  advise whether it objects to a draft document, and may extend the time that it needs to review the document. ASX asks listed entities to bear these timing requirements in mind and allow sufficient time when they submit their draft notices of meeting for ASX to review.

AGM considerations Resolutions to increase non-executive director fee pool

  • If you are proposing a resolution at your AGM to increase the non-executive director fee pool, your notice of meeting will need to include details of any securities issued to a non-executive director under Listing Rule 10.11 or 10.14 with the approval of the holders of the entity's ordinary securities at any time within the preceding 3 years.
  • When preparing the proxy forms for your AGM, please remember the following requirements:
    • a proxy form must give a security holder the ability to direct their proxy to abstain from voting on a resolution, as well as to vote for or against the resolution;
    • if the proxy form specifies that the chair of the meeting is appointed as proxy and if the security holder does not appoint another person to act as their proxy, the proxy form must also include a statement as to how the chair intends to vote undirected proxies; and
    • the proxy form has removed the requirement for the ''chairman's box''.

Periodic report reminder

  • Statutory Audited Annual Accounts, 30 June balance date: Wednesday 30 September 2015
  • Quarterly Reports for Mining and Commitments Test Entities: Friday 30 October 2015
  • Annual Reports, 30 June balance date: Monday 2 November 2015

Resource reporting (mining, oil and gas)

ASX listing rules impose additional reporting requirements on resources companies. Chapter 5 of the ASX Listing Rules contains detail of the requirements.

Issues under Rule 7.1A Guide

The ASX has published a  Listing Rule 7.1A User Guide, with detailed information on the operation of Listing Rule 7.1A, including information to assist eligible entities and their advisers in drafting the notice of meeting seeking security holder approval, and information to assist eligible entities with their disclosure requirements once an issue under the rule has been made. Eligible entities making issues under listing rule 7.1A should ensure they have a mandate from their security holders to make the issue and, if necessary, should refer back to the notice of annual general meeting (at which the approval was obtained).

The guide also provides information on additional disclosures, issue price information, etc. Download the guide from the 'Downloads' page on the ASX website under the heading "Listing Rule 7.1A - Additional Placement Capacity".

Mertons can help you with your reporting and Notice of Meeting drafting this AGM season.

ACNC study shows 9 out of 10 Australians donate to charity

Research released in August by the Australian Charities and Not-for-profits Commission (ACNC) has found that 9 out of 10 Australians donated to charity in the past year.

The study, Public Trust and Confidence in Australia Charities 2015, found that 87% of Australians made some form of contribution to charity in the last year and 78% of people support at least one charity regularly. It also found that charities as a whole were rated as the third most trustworthy institution in Australia, behind only doctors and the police. 

Download a copy of the report.

Institutional investors release governance guidelines for NZ listed companies

A group of institutional investors with significant investments in New Zealand listed companies — around 15 per cent of the equity market — has issued guidelines on corporate governance it wishes to see companies adopt, including director independence, tenure and board renewal; remuneration; and reporting and disclosure. The guidelines also recommend new practices such as the right of shareholders to nominate directors; voting on a poll rather than a show of hands; and shareholder approval of share issues above five per cent of total shares.

The investors behind the guidelines are the ACC Steering Group, AMP Capital, ANZ Investments, Devon Funds Management, Forté Funds Management, Government Superannuation Fund, Harbour Asset Management, JB Were, JMIS, Milford Asset Management, Mint Asset Management, National Provident Fund, Nikko Asset Management, and Sovereign and Salt Funds Management. The guidelines are supported by the NZ Stock Exchange, the Financial Market Authority and the Institute of Directors.

Download the guidelines.



Sources of information for this document:

Australian Charities and Not-for-profits Commission (ACNC); Australian Institute of Company Directors (AICD); Australian Securities and Investments Commission (ASIC); Australian Securities Exchange (ASX); Clayton Utz; ComLaw; Commonwealth Government; Fairfax Media; Fair Work Commission; Governance Institute; Industry Super Australia; Office of the Australian Information Commissioner (OAIC).


Disclaimer: The content in this Mertons Corporate Update is only intended to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. We attempt to ensure that the content is current but we do not guarantee its currency. You should seek legal or other professional advice before acting or relying on any of the content.