mertons corporate snapshot - may 2009
Director's duty to disclose documents and indemnity for costs - Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 3) [2008] FCA 1986
A director, who had provided information to the Australian Prudential Regulation Authority (APRA) in the course of a review of the company, was found to have a duty to provide the company with copies of those documents which he had given to APRA. The source of this obligation was the directors' duty to act in the best interests of the company, first and foremost and to obtain legal advice if necessary, before providing company documents to another party.
James Hardie
As a general comment, the case is very limited to its facts and hinges mostly, on a number of corporate governance defects, not considered typical of large listed companies in Australia. Any 'lessons' from it are limited to what Mertons would consider good governance practices in any event.
Federal Budget - Employee Share Schemes
This year's Federal Budget included the announcement that the Government would abolish deferral of tax on the upfront discount for employee share schemes for shares and options "acquired after 7:30pm" on 12 May 2009, and the imposition of means testing on the A$1,000 exemption.
Following enormous backlash and condemnation from business, unions and the general public, the Government in recent days signalled it may back down or revise some elements of their proposal. If this is not forthcoming, companies will need to review their remuneration strategies to see whether they can continue with a viable employer equity component.
Federal Budget - Investment Allowance: Increased to 50% for 'Small Business'
The Government announced in the Budget that small business (those with annual turnover of $2 million or less) will be eligible for a 50% Investment Allowance for eligible assets costing $1,000 or more (exclusive of GST) that they commit to buy between 13 December 2008 and 31 December 2009, and start to use or have installed ready for use by 31 December 2010.
Review of Disclosure of Directors Interest Notices - Q1 2009
The Australian Securities Exchange (ASX) has released its latest review of disclosure of Directors' Interest. Notices lodged by listed entities and concludes a 93% compliance rate for the period tested.
Exposure draft - Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009
The government has released for comment draft legislation which will extend the application of Chapter 7 of the Corporations Act 2001 to margin lending and securities lending facilities and create obligations pertaining to responsible lending practices. Margin lending will subsequently be defined as a financial product.
On the horizon
Executive Remuneration: Following massive falls in global and Australian equities markets and community concern about rising unemployment, executive remuneration has become a highly politicised issue. In particular, media scrutiny has provided an opportunity for Government reform of the corporate law in this area. Separately governance and advisory bodies have released new guidelines to assist companies in making and communicating remuneration decisions and outcomes. With new restrictions and increased obligations and penalties pending, all companies should be reviewing their policies.
Directors Margin Loans, risk and possible reforms: The Corporations and Markets Advisory Committee (CAMAC) will provide advice by 30 June 2009 on a number of market practices, including margin loans to directors. This creates potential risk areas and various options for reform of directors' margin loans, as identified by CAMAC in its issues paper released earlier this year.
Recent trends in D&O insurance: The Australian directors' and officers' (D&O) insurance market is undergoing significant change. AIG, the largest provider of D&O insurance in Australia, is presently in the process of changing the terms of its offering. These changes are significant for companies and their directors and will require companies to be clear about the type of risks they want to insure against and who the protection covers.
Proposed amendments to Foreign Acquisitions and Takeovers Act: The Treasurer Wayne Swan announced earlier this year that the Government will seek to amend the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) to clarify the operation of the foreign investment screening regime. The proposed amendments extend the application of the FATA to all foreign investments to capture more complex investment structures (for example, convertible notes will be treated as equity for the purposes of the FATA). If passed, the amendments will operate retrospectively from 12 February 2009.
Short Selling Update: On 5 March 2009, ASIC advised that it would extend the ban on covered short selling of financial securities until 31 May 2009. Today, 25 May 2009, ASIC advised it would lift the current ban on covered short selling of financial securities, effective immediately.
Given the pressures created on Australia's markets by the global financial crisis and recession, ASIC notes that under its powers it will not hesitate to re impose the ban without consultation if it thinks necessary.
ASIC acts on rumourtrage and issues first ban: On 23 March 2009, ASIC issued an 18 month ban on the provision of financial services by broker, Richard Macphillamy, for spreading false and misleading information about Macquarie Group Ltd and Macquarie Cash Management Trust. Mr Macphillamy is the first person to be punished as part of ASIC's "rumourtrage" investigations under Project Mint. A timely reminder for companies on the importance of controlling information flow.
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