Newsletter: January 2016

Mertons' Corporate Update - January 2016

 Mertons’ Corporate Update – January Quarter 2016

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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Mertons now the largest provider of company secretarial and corporate governance services

The acquisition of the client book of Australian Company Secretaries (ACS) on 31 December 2015 has transformed Mertons into the largest provider of company secretarial and corporate governance services in Australia.

Mertons Managing Director, Mark Licciardo commented:

"We are extremely excited to complete the transaction with ACS following many months of negotiations. This is a real game changer for us.”

"What differentiates Mertons from the competition is our sole focus on providing a premium outsourced company secretarial and governance service to our range of ASX listed public companies, unlisted public and private companies, as well as not for profit entities. We have deliberately chosen not to combine our services with accounting or share registry services to maintain the independence of our governance advice and company secretarial service delivery, both vital to the success of today’s companies”, he added.

Mertons is the leading provider of company secretarial and corporate governance services in Australia.  Contact us for an obligation free discussion on how we can help you. 

The value of getting CEO succession right

The 2015 study of CEO’s succession by PwC shows the cost to shareholders of failing to plan for succession.

The study showed that Australian boards are still being forced into CEO-separation more than global boards. Forced CEO turnover events led to significantly greater loss in shareholder value in Australia – estimated around AU$8bn – relative to shareholder outcomes from global companies, suggesting a pressing need for Australian boards to institutionalise the CEO succession planning process and take active steps to increasing CEO tenure.

Interestingly, the study found that often it was the lowest-performing companies that get succession planning wrong. Far more often they have a forced turnover – indeed, 40 percent of all forced turnovers have taken place at companies in the lowest quartile over the 15 years of the study.

The study concluded that it is critical for boards to have proactive involvement in CEO succession planning.

Contact Mertons for help in developing a robust succession plan for key roles.

ASX News

Transition to T+2 settlement

The ASX has announced that the current target date for implementation of T+2 settlement is Monday 7 March. Corporate action timetables will also need to be amended after this date. For corporate actions with a record date of 9 March 2016 or later, the ex period will be two business days (inclusive) rather than three. Online forms have been amended effective 9 March. However, the information and rule references displayed on the Online Forms will continue to refer to T+3 settlement or a 3 day ex period up until the T+2 Settlement transition weekend (5–6 March). Further information about the transition to the T+2 settlement is available here.

Mertons can help you review and update your corporate action timetable to ensure compliance with the new rules.

Upcoming deadlines for periodic reports

  • Half Yearly reports & Half Year accounts/ Preliminary Final reports – Monday 29 February 2016
  • Half Year accounts - Mining Exploring Entities only – Tuesday 15 March 2016
  • Full Year audited accounts/auditor's report/directors' statement – Thursday 31 March 2016.

Reporting Calendar now online

The 2016 reporting calendar for listed entities is now available on the home page of ASX Online. It outlines key reporting dates and days on which ASX is closed.


Updated Guidance Notes

On 11 December 2015, ASX published updated versions of Listing Rules Guidance Notes 4, 15, 15A and 16.

Guidance Notes 4, 15 and 15A have been updated to clarify the listing fees payable by entities listed in the ASX Foreign Exempt Listing category and foreign entities listed in the ASX Listing category that are also listed on another exchange.

Guidance Note 16 has been updated to include information about the general trading halt email addresses in the Sydney, Melbourne and Perth home branches referred to in Listed@ASX Compliance Update no 12/15.

Guidance notes are available here.

Australia Post new three-tier delivery schedule needs to be considered by companies

Australia Post introduction of three delivery speeds for letters sent within Australia (Regular, Priority and Express Post) will have an impact on security holder communications, in particular as it relates to corporate actions that have timeframes for security holders to receive notice of their entitlements and return acceptance forms. ASX has stated that it does not intend to lengthen corporate action timetables in response to Australia Post changes.

Trading halt email addresses

To assist listed entities submit a written request for a Trading Halt, particularly before the market opens, the ASX Home Branch offices have each established a designated trading halt email address to be used to send a request for trading halt to ASX. Those email addresses are:

Sydney Home Branch:

Melbourne Home Branch:

Perth Home Branch:

Listed entities are requested to email both their Listings Compliance Adviser, as they currently do, and also the general trading halts email address of their Home Branch office when requesting a trading halt.

If their Listings Compliance Adviser is not in the office, another person at Listings Compliance will pick up the email and arrange to process the trading halt request.

The request must contain the information required under Listing Rule 17.1.

Further information about trading halts and the procedure for requesting them is contained in Listing Rules Guidance Note 16 Trading Halts and Voluntary Suspensions.

Australian Charities Report 2014

The Australian Charities and Not-for-profits Commission released its Australian Charities Report 2014 in December 2015. While this is the second Charities Report, this is the first time it provides an in-depth study of the financial situation of the charity sector in Australia. The report was produced by ACNC in collaboration with the Centre for Social Impact and the Social Policy Research Centre at UNSW.

One of the key findings from the report was that Australian registered charities had combined income of $103 billion, with nearly $7 billion coming from donations and bequests. Over the same period, charities spent $95 billion pursuing their charitable purposes, with the remaining $8 billion set aside for future charitable investment.  

Australian charities also employ more than 1 million people directly, as well as have the support of around 2 million volunteers.

The largest charities by sector are religion (30%), followed by education and research (18%) and health (9%). Interestingly, the largest 5% of charities receive 80% of the sector’s income.

The report provides a valuable insight into the size and economic importance of the sector.

Contact Mertons if you are a not for profit wanting help to improve your governance practices and reporting protocols.

Review of governance of not-for-profit superannuation funds

In December 2015, the Australian Institute of Superannuation Trustees (AIST) announced that together with Industry Super Australia (ISA), it had asked former RBA Governor and Treasury Secretary Bernie Fraser to lead a review of governance arrangements in respect of not-for-profit superannuation funds, and to propose a best practice Governance Code for such funds. The code of conduct will be mandatory for AIST and ISA member funds and complement APRA prudential standards and guidance. It is expected to be released by 30 April 2016.

The background to the review is available here.

Contact Mertons to develop a solid governance framework for your not-for-profit superannuation fund.


Board papers: what information does the board need to make a decision?

The Governance Institute has recently released a Good Governance Guide on Board papers. Board papers provide directors with the information they need to perform their duties. The Governance Institute advises that senior management needs to consider carefully the appropriate balance of the level of detail directors need to discharge their obligations and providing too much information. “The critical question is what information the board needs to make a decision.”

Mertons agrees that good governance involves having clear guidelines on how board papers should be presented. The guidelines should ensure that board papers

  • contain sufficient information to provide for an informed decision by directors
  • are written in plain English
  • share a consistent format and layout
  • include a summary, background and more detailed content
  • clarify upfront whether the matter is for information, for discussion  or for decision and, where a decision is being sought, contain a clear recommendation from management and the exact wording of the proposed resolution directors are being asked to consider
  • if directors are being asked to pass a resolution, the board paper should clearly articulate the pros and cons and material risks of each alternative open to the board
  • articulate how any matter on which a decision is being sought is aligned with the strategic plan
  • are dated and include the author’s name and title, and the name and title of the authorising executive or senior manager
  • have been reviewed and approved by the CEO or his or her delegate before being circulated to the board.

Contact Mertons for help to review or prepare clear guidelines for the preparation of board papers.

PM’s innovation statement provides ‘safe harbour’ for directors

While the focus of the Prime Minister’s innovation statement, launched in December, is about providing tax and other incentives to promote innovation and entrepreneurship, it also introduces measures to allow companies and directors to take the necessary risks to innovate and invest in start ups.

Some key initiatives to help business innovate include:

  • increasing access to company losses. The ‘same business test’ will be relaxed to a new and more flexible ‘predominantly similar business test, allowing companies to access prior year losses where their business, while not the same uses similar assets and generates incomes from similar sources.
  • Insolvency laws reform to strike a better balance between encouraging entrepreneurship and protecting creditors by:
    • reducing the current default bankruptcy period from three years to one year
    • introducing a ‘safe harbour’ for directors from personal liability for insolvent trading if they appoint a restructuring adviser to develop a turnaround plan for the company
    • making ‘ipso facto’ clauses, which allow contracts to be terminated solely due to an insolvency event, unenforceable if a company is undertaking a restructure.

The bulk of the measures announced will start from July 2016. For more information, visit

 Mertons can help you update your governance policies and implement processes to manage business risk.

Business Set-up, Transfer and Closure

An inquiry by the Productivity Commission into business set-up, transfer and closure has found a number of similar themes as the Prime Minister’s innovation statement (see above).

Key findings of the report include:

  • Some new business models, particularly those that exploit digital technology, challenge existing regulatory arrangements or cause associated businesses to operate in regulatory grey areas.
    • An across-the-board legislative shift is required to enable explicit exemption of classes of new businesses (for a fixed period) from particular regulatory requirements, where these deter entry but exemption does not threaten consumer, public health and safety, or environmental outcomes.
    • The default position of governments should be to allow entry of innovative new business models, not restrict them or protect incumbents.
    • The planned new regulatory framework for crowd-sourced equity should balance the financing needs of business against the risk preferences of different types of investors.
    • Some specific reforms to Australia's corporate insolvency regime are warranted.
      • Formal company restructuring through voluntary administration should only be available when a company is capable of being a viable business in the future.
      • A 'safe harbour' defence should be introduced to allow directors of a solvent company to explore, within guidelines, restructuring options without liability for insolvent trading.
      • A simplified liquidation process should be introduced to reduce the time and expense of winding up businesses with few or no recoverable assets.
      • All directors should be required to obtain a director identification number.


ASIC consults on ‘sunsetting’ class orders

1. Financial reporting relief for certain small proprietary companies and registered foreign companies.  ASIC has released a consultation paper proposing to remake two class orders that are due to expire (‘sunset’) on 1 April 2017 relating to financial reporting by small proprietary companies controlled by a foreign company and by registered foreign companies.

The class orders proposed to be remade are:

  • Class Order [CO 98/98] Small proprietary companies which are controlled by a foreign company but which are not part of a large group in Australia
  • Class Order [CO 02/1432] Registered foreign companies: financial reporting requirements.

Consultation Paper 248 Remaking ASIC class orders on reporting by foreign entities: [CO 98/98] and [CO 02/1432] (CP 248) proposes that they be remade as a single legislative instrument.

The consultation paper is available here. Submissions are due on 29 February 2016.

2. Financial Calculators. ASIC has released a consultation paper proposing to remake its class order on generic financial calculators, due to expire 1 April. The new instrument would continue the relief currently given by [CO 05/1122] Relief for providers of generic calculators with some changes, for example, that an estimate of a future return must be adjusted for inflation.

Submissions on CP 249 are due on 12 February 2016. Download the consultation paper.

ASIC updates guidance on employee incentive schemes

ASIC has made some small changes to its recently released regulatory guide and updated class orders in relation to employee incentive schemes.  

ASIC amended Class Orders [CO 14/1000] Employee Incentive Schemes: Listed Companies and [CO 14/1001] Employee Incentive Schemes: Unlisted Companies to address some technical drafting issues. Regulatory Guide 49 Employee incentive schemes (RG 49) has also been updated to provide further guidance. There are no significant changes to the underlying policy.

Corporate Governance: tone from the top

The 2015 Tone from the Top is the result of 1865 interviews with business leaders in 36 countries and 86 in-depth interviews with board members in eight countries, conducted by Grant Thornton between December 2014 and March 2015, focusing on five key governance questions:

  1. Whose responsibility is culture?

While there are some national differences in the definition of culture, nine out of ten business leaders believe culture is important to a robust governance framework and board members generally agree that it is the board that needs to build and foster this culture.

  1. How can boards foster a culture of good governance?

A good governance culture directs how a company behaves and brings to life the behaviours in corporate codes of conduct.

  1. What does ‘diversity’ really mean and how can it be encouraged?

While two thirds of respondents thought their boards were effective at encouraging diversity, only one-sixth of directors globally are women. Board members agree that there is a lack of diversity on boards which makes 'groupthink' a bigger danger. They want to look beyond gender to also seek diversity of culture, background, knowledge and thought.

  1. What skills do boards need now and in the future?

Succession planning on boards - to ensure consistency but also to better adapt to new developments in the business environment - has risen up the corporate agenda. Business leaders want their board members to have current industry knowledge, whereas board members themselves indicated more interest in their peers bringing new ideas to the table and having the time available to contribute effectively. A particular concern is technology and whether boards have sufficient current knowledge of the digital space to appropriately advise their management teams.

  1. Is there conflict of interest between short-term profits and long-term growth?

Almost three-quarters of the businesses globally operate under a planning cycle of three years or less. Most board directors believe this is an appropriate planning horizon although some would like to see CEO compensation linked to longer-term performance to avoid operational decisions being driven solely by quarterly reporting.

Contact Mertons for help in undertaking a governance review and development of a solid governance framework, board performance review and/or formulation of a board skills matrix.

Board evaluations

The Governance Institute has recently released a Good Governance Guide on Issues to consider in board evaluations.  Importantly, it is necessary for organisations to have in place a robust process for regular, formal, evaluations of the board, its committees and individual directors.  Such an evaluation can provide meaningful information for improvement of board performance and effectiveness.

The ASX Corporate Governance Principles recommend that listed entities should have and disclose a process for periodical evaluation of board performance, and disclose whether a performance evaluation was undertaken in accordance with that process.

Mertons agress that as part of the board evaluation, the review should also look into the effectiveness of the company secretary in their role of being accountable to the board on all matters relating to the functioning of the board.

Other issues to consider include:

  • Establishing the purpose of the evaluation
  • What disclosure is required
  • What method of evaluation will be used
  • What is the best timing for the evaluation
  • How often will the evaluation be carried out
  • Scope of the evaluation (who, what, when, how often)

Board effectiveness reviews in the financial services sector – A regulatory burden or an opportunity?

A recent study by Grant Thornton in the UK (‘Board effectiveness reviews in the financial services sector – A regulatory burden or an opportunity?’) showed that 64% of companies in the sector review board effectiveness on an annual basis. In addition 66% of respondents had an externally facilitated review within the last four years. The main driver for commissioning a review is adherence to market best practice (54%).

The majority of the firms surveyed saw responsibility for coordination of board effectiveness reviews as lying with the chairman of the board, board committee or the company secretary.

The vast majority of respondents (79%) considered board effectiveness reviews added real value, with a similar number (76%) noting that board effectiveness reviews in their companies had prompted change in the operation of the board of the business as a whole, with 97% of these respondents stating that this change resulted in tangible improvement in board effectiveness.

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

Director sentiment continues to grow in favour of tax reform

The Director Sentiment Index by the Australian Institute of Company Directors (AICD) is a bi-annual survey and is Australia’s only market sentiment indicator of directors’ views on current and future economic conditions and key regulatory, governance and public policy issues.

The most recent report, released in November 2015, identified the three top issues that directors think the federal government should address in the near future as: tax reform, infrastructure and productivity growth.

The results also show that directors are not so much concerned with the level of taxation, but more with the efficiency of the taxation system. The top priority for a review of the tax system remains the GST. This is followed by personal income tax, multinational tax arrangements and state-based taxes. According to the index, support for changes to the GST has now risen to 82 per cent. Almost 75% of directors believed that personal income tax is too high, and 55% saying that corporate tax rates are too high.

Need for AGM reform

The Director Sentiment Index (DSI) also revealed that over one third of directors consider the AGM system in Australia to be dysfunctional. The results suggest that debate about the efficacy of the AGM might have reached a ‘tipping point’, potentially requiring technological change and legislative reform.

The latest DSI results suggest we may have reached a tipping point in our AGM system”, said Rob Elliott, Executive Director of the AICD Governance Leadership Centre. 

 “Digital technology can change the way AGMs are run. The Government should seriously consider revisiting CAMAC’s work on AGM’s* and ensure our laws reflect the way companies and their shareholders operate in practice, both now and in the future”.

*A Corporations and Markets Advisory Committee (CAMAC) discussion paper released in 2012 included several proposals about the use of online technology, including streaming.

A recent report by Ernst & Young – Equipping the board for the AGM – provides insights about the future of AGMs, including hybrid physical-online meetings and completely virtual AGMs.

Contact Mertons for help with planning and implementing your AGM and put in place shareholder engagement initiatives.


Gender Equality – some numbers to consider

Australian employers report every year on pay and the composition of their workforce, by gender. Here’s what the latest data shows: 

84.6%: CEOs or heads of business that are men. While women make up nearly half the total workforce, their representation declines steadily with each step up the corporate ladder.

24.0%: overall gender pay gap in favour of men based on total remuneration, which includes salary, superannuation and discretionary pay including bonuses. On average, men working full-time in Australia earn over $27,000 a year more than women working full-time. 

35.0%: the gender pay gap in financial and insurance services, the largest pay gap of any industry. While the majority of employees in finance and insurance are women, the top jobs – with their big salaries and bonuses – are dominated by men. 

75.1%: of part-time jobs are held by women, showing that women are much more likely than men to fit work around caring. While women struggle for equal opportunity and reward in the workplace, men struggle to be recognised as carers. 

6.3%: of management roles are part-time. While more than one in five (22.7%) of non-management roles are part-time, employers aren’t embracing non-standard work hours in senior roles – excluding people with caring responsibilities from progressing their careers. 

80.4%: of employees working in health care and social assistance are women. Many Australian industries are dominated by employees of one gender, with ‘blue-collar’ industries remaining male-dominated and women concentrated in health, education and retail. Female-dominated industries traditionally offer lower pay.

88.3%: the proportion of technicians and tradespeople who are men. It’s not just industries which are gender segregated, but occupations too, with three-quarters (74.6%) of clerical and administrative workers being women. 

26.3%: employers who conducted a gender pay gap analysis in 2014-15. This represents an increase since last year and growing awareness that unconscious bias could be affecting pay outcomes. 

16.1%: have a gender target for their board. With women comprising fewer than one-quarter (23.6%) of directors and one-seventh of chairs (14.2%), targets are a way to help improve gender equality on the governing bodies of corporate Australia.  

Data is collected from non-public sector organisations with 100 or more employees. Read more about gender equality in Australia.

Mertons can assist you in developing your diversity policy, action plan and reporting framework.



Sources of information for this document:

Australian Charities and Not-for-profits Commission (ACNC); Australian Government; Australian Institute of Company Directors (AICD); Australian Institute of Superannuation Trustees (AIST); Australian Securities and Investments Commission (ASIC); Australian Securities Exchange (ASX); ComLaw; Commonwealth Government; Ernst & Young; Fairfax Media; Fair Work Commission; Governance Institute; Grant Thornton; Industry Super Australia; Office of the Australian Information Commissioner (OAIC); Productivity Commission; PwC; Workplace Gender Equality Agency (WGEA).


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.