This is a service specifically targeted at the needs of busy non-executive directors (NEDs). We aim to give you a ‘heads up’ on the things that matter for NEDs in the week ahead - all in two minutes or less.
In this edition, we discuss an article published by the Australian Securities and Investments Commission (ASIC) regarding predatory lending practices. We also examine two Takeovers Panel (Panel) decisions in relation to the affairs of Tempus Resources Ltd (Tempus) and Ignite Limited (Ignite).
In Over the Horizon, we discuss the recent workplace legislation that proposes to give employees the ‘right to disconnect’ after working hours, and how this could impact the corporate space.
GOVERNANCE + REGULATION
ASIC taking action on predatory lending to consumers and small business. On 8 February 2024, ASIC published an article written by the regulator’s Deputy Chair, Ms Sarah Court, stating that ASIC will bolster its focus on high-cost credit and predatory lending to consumers and small business. Ms Court warned that ASIC may take action against directors in their personal capacity where significant corporate misconduct is alleged, as evidenced by ASIC’s long-running proceedings against Cigno Pty Ltd and BHF Solutions Pty Ltd for engaging in unlicensed credit activity (see ASIC v BHF Solutions Pty Ltd (No 2) [2023] FCA 787 ). The article further stated that ASIC will be focused on compliance with financial hardship obligations in 2024, with the regulator reviewing the hardship practices of various large lenders and continuing to pursue civil penalty proceedings against Westpac Banking Corporation for allegedly failing to respond to customer hardship notices within the required timeframe. See ASIC article .
LEGAL
Takeovers Panel publishes reasons for declining to conduct proceedings in relation to the affairs of Tempus. On 8 February 2024, the Panel released its reasons for declining to conduct review proceedings in relation to the Panel’s decision on 9 January 2024 to decline to conduct proceedings in relation to the affairs of Tempus. The original application, brought by a shareholder of Tempus, alleged that Tempus’ rights issue announced on 29 November 2023 gave rise to unacceptable circumstances because: (1) it excluded shareholders with registered addresses in certain overseas jurisdictions or whose shares were held through a custodian; (2) the rights issue excluded shareholders from applying for shortfall shares unless specifically asked by the underwriter; and (3) the shortfall shares would be held by the underwriter and potentially the newly appointed board of Tempus who could then influence the outcome of a shareholder vote on the removal and appointment of directors at a general meeting requisitioned by shareholders. The initial Panel declined to conduct proceedings on the basis that (among other things) there was no evidence to suggest that the circumstances of the rights issue would likely affect the control of Tempus, and the evidence supported the conclusion that Tempus had a legitimate need for funds. The review Panel agreed, noting that it is not uncommon for listed companies to choose not to extend a rights issue to foreign shareholders, particularly when facing financial hardship, and that there was no evidence that the custodian could not participate in the rights issue. Further, there was an appropriate dispersion strategy employed by Tempus with regards to the allocation of shortfall shares. The review Panel ultimately did not consider that there was any reasonable prospect that they would make a declaration of unacceptable circumstances. See Tempus Resources Limited [2024] ATP 2 .
Takeovers Panel receives application from Ignite in relation to its affairs. On 7 February 2024, the Panel announced that it received an application from Ignite, in relation to Ignite’s own accelerated non-renounceable entitlement offer announced on 23 November 2023. Ignite submits that its second largest shareholder, Octavium Capital Investments Pty Ltd (Octavium) (which held a voting power of 24.21% in Ignite), applied for 17,715,000 Ignite shares under the offer, effectively on behalf of Graham Newman Pty Ltd (GNPL). GNPL is the entity that made payment for the subscription price to Ignite on 28 November 2023. On 8 December 2023, Octavium released a substantial holder notice disclosing it had sold in 17,715,000 Ignite shares. On 11 December, GNPL released a substantial holder notice disclosing a relevant interest in 17,715,000,. Ignite submits that: (1) ‘Octavium applied for the subscription shares to facilitate the acquisition of a substantial interest in Ignite by GNPL’, and (2) ‘Octavium and GNPL became associated by 28 November 2023, resulting in GNPL acquiring voting power of 24.21% in Ignite (held by Octavium at that time) in breach of section 606’ of the Corporations Act 2001 (Cth). No decision has been made whether to conduct proceedings. Boards should monitor the occurrence of similar circumstances in any rights issues they undertake in a bid to ensure that such issues of securities are taking place in an efficient, competent and informed market. See Takeovers Panel media release .
OVER THE HORIZON
A right for employees to disconnect? On 8 February 2024, the Senate passed the Fair Work Amendment (Right to Disconnect) Bill 2023 [No. 2]. The ‘right to disconnect’ - that is, a legislated ‘right to switch off’ after work hours - was introduced as an 11th hour compromise to secure cross-bench support for the Government’s industrial relations legislation. Although the practicalities of the bill - including the application of penalties for breach - are still in question, it is expected that: (1) the right to disconnect may prevent employees from ‘being punished for refusing to take unreasonable work calls or answer emails in their unpaid personal time’; and (2) employees may be able to raise complaints, which, if not resolved, may be escalated to the Fair Work Commission to obtain an order to stop unreasonable out-of-hours contact (breach of which may attract a hefty $18,000 fine). Directors will need to carefully consider how the new right (which is in force in several European countries) will be implemented in practice, in order to minimise impacts on productivity while recognising the importance of work/life balance in maintaining employee engagement and loyalty. See media article .