mertons corporate snapshot - august 2009
Employee share schemes - Back to the future
As previously advised, the Federal Budget released in May 2009 included the announcement that the Government would (effective from 7:30pm on Budget night):
- abolish the deferral of tax on the upfront discount for employee share schemes; and
- impose means testing on the A$1,000 exemption.
The proposal received widespread criticism for discouraging the use of equity-based incentive plans. On 5 June 2009, Treasury released a Consultation Paper setting out a revised proposal (including draft legislation) for comment. The Government announced further changes to the proposal on 1 July 2009, with the release of Treasury's Policy Statement. This recent round of changes largely represents a shift back to the current (ie pre-Budget) regime, subject to some key differences.
Access to share registers - regulation of unsolicited off-market offers
In response to concerns raised by ASX listed companies regarding the increased proliferation of unsolicited off-market share offers (USOs) by David Tweed, charities and others, the Treasury released an Options Paper on 29 May 2009 containing a number of potential measures designed to better regulate USOs.
The full text of the Options Paper is available on Treasury's website.
The Options Paper proposes the introduction of a 'proper purpose test' which would allow a company to withhold a copy of its register of members if the company forms the view that the request is not for a proper purpose.
First review of reporting against revised ASX Corporate Governance Council?s guidelines
ASX Markets Supervision (ASXMS) has released the first review of reporting against the revised Corporate
Governance Principles and Recommendations, covering 168 entities with a 31 December 2008 reporting date.
A key change introduced in the revised guidelines was an emphasis on the disclosure of an entity's actual
practice when reporting on governance ? a company can no longer report that it has certain practices in place
but must disclose or provide a summary in the annual report of the specific practice in place or any policy
governing that practice.
On the horizon
Termination payment update: The Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 (Bill) was introduced into Parliament on 26 June 2009. The Bill facilitates the Federal Government?s previous announcement on 18 March 2009 in relation to proposed reforms to limit the payments which may be made to company executives upon termination without shareholder approval. The Bill is based on an Exposure Draft of the proposed bill and regulations that were released on 5 May 2009 for public consultation - there are some key differences between both.
APRA's long awaited executive pay guidelines: On 28 May 2009, the Australian Prudential Regulatory Authority (APRA) released a consultation package on remuneration for authorised deposit-taking institutions and general and life insurance companies. The package comprises a discussion paper, draft extensions to the governance standards already applying in these industries and a draft prudential practice guide (PPG).
Proposed reforms to the regulation of margin lending, debentures and trustee companies: In June 2008, the Government released the Green Paper, Financial Services and Credit Reform: Improving, Simplifying and Standardising Financial Services and Credit Reform, which sought feedback on a number of reforms to the financial services sector. Further to this, on 7 May 2009, the Government released the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009. The draft legislation addresses three areas of financial services regulation - margin loans, trustee companies and debentures.
National Unfair Contract terms regime: On 11 May 2009, the Federal Government released for public comment its draft national unfair contract terms regime which extended to business-to-business transactions. As a result of nearly 100 submissions the legislation was substantially changed before its introduction into parliament.
ASX Companies Update No.3 of 2009: On 1 July 2009, ASX released its most recent Companies Update. The Companies Update highlights the areas that ASX will be focusing on leading up to the financial reporting period and reiterates ASX's position on the continuous disclosure principles applying during the results period.
ASIC review of 30 June 2009 financial reports: On 26 June 2009, ASIC released the results of its review of the full and half year financial reports for periods ending 31 December 2008 for over 100 entities. The critical point for entities is to ensure clear and unambiguous financial reporting. While the results of ASIC's review did not reveal any significant cases of non-compliance, ASIC has provided warnings to directors and those preparing financial reports in preparation for the current reporting period.
New ASIC policies on equity raising (including share purchase plans): ASIC has announced a number of new measures which are intended to enhance efficiency in capital raisings.
Taxation treatment of buybacks: On 1 June 2009 Treasury released a consultation paper in relation to the implementation of the Board of Taxation's recommendations to improve the taxation treatment of off-market share buybacks.
Securities lending disclosure: On 3 July 2009, ASIC released Consultation Paper 107 in relation to securities lending and substantial holding disclosure. ASIC states that the Consultation Paper "seeks to improve disclosure of substantial holdings in practice and makes it clear that securities lending transactions and prime broking arrangements need to be taken into account in calculating a substantial holding".
For further information on any of the topics in our snapshot please contact:
Mark Licciardo
Managing Director
Level 6, 350 Collins Street
Melbourne Victoria 3000
ph: 03 8689 9997
fax: 03 9670 5942
mobile: 0419 327 725
www.mertons.com.au
Sources of information for this document:
Freehills, Australian Securities Exchange, Australian Securities and Investments Commission and Chartered Secretaries
Australia.