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 the analysis released by the Australian Institute of Company Directors (AICD) on board diversity data, further guidance published by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) on the recently commenced Financial Accountability Regime (FAR), the Treasurer’s announcement to introduce a financial sector regulatory initiatives grid and a consultation paper published by ASX Limited (ASX) in relation to the proposed replacement to its Clearing House Electronic Subregister System (CHESS). We also examine an application received by the Takeovers Panel from various applicants in relation to the affairs of Pact Group Holdings Limited (Pact Group).
In Risk Radar, we consider the risk of litigation presented by Australia’s proposed mandatory climate-related disclosure regime, as opined by the AICD.
GOVERNANCE
AICD releases analysis of board diversity data. On 8 March 2024, AICD released its analysis of board diversity data revealing that the ASX 100, ASX 200 and ASX 300 are close to reaching 40% female director representation, which is considered a best practice gender equality goal, at 39.3%, 37.4% and 36.9% respectively. Further, the data shows that the ASX 20 and ASX 50 have achieved a minimum of 40% female director representation. AICD Managing Director and CEO, Mr Mark Rigotti, stated that ‘[t]his success reflects the long-term efforts of the Australian business community to ensure continued stakeholder scrutiny of appointments to listed boards ’. While these results are positive, the data also reveals a noticeable disparity in female participation in chair roles. There are currently no female chairs on the ASX 20, and women fill 12% and 11.6% of the positions on the ASX 100 and ASX 300 respectively. Similar to the data on gender pay gaps recently published by the Workplace Gender Equality Agency (discussed in a previous edition of Boardroom Brief ), the AICD’s analysis raises challenges regarding the pathways for promotion of women to leadership roles in Australia’s boardrooms. Directors are reminded to critically assess the adequacy of diversity initiatives within their companies. See AICD media release .
REGULATION
ASIC and APRA publish further guidance on the FAR and release consultation paper. On 14 March 2024, ASIC and APRA released further guidance to support banks, insurers and superannuation trustees prepare for the commencement of the FAR. This release complements other guidance recently released by the regulators, including as discussed in last week’s edition of Boardroom Brief . The materials published include: (1) an information paper to assist entities and their accountable persons in understanding and complying with their obligations under the FAR; (2) an updated accountability statement guide and guidance to help entities prepare accountability statements under the FAR's enhanced notification obligations; and (3) reporting form instructions to assist entities in reporting breaches of the FAR. The regulators also commenced a consultation process seeking feedback from industry participants on proposed amendments to the regulator rules and draft key functions descriptions for insurance and superannuation entities, which will be open for submissions until 19 April 2024. The FAR commenced for the banking industry on 15 March 2024, and will take effect for the insurance and superannuation industries on 15 March 2025. See ASIC media release .
Treasurer announces financial sector regulatory initiatives grid. On 11 March 2024, the federal Treasurer, Dr Jim Chalmers, announced that the Federal Government will introduce a financial sector regulatory initiatives grid, modelled on the grid in place in the United Kingdom, to coordinate regulatory developments in the financial services sector. The grid will be a rolling, 24-month forward program of regulatory initiatives that will aim to: (1) help financial services more effectively engage with government and regulators; (2) allow regulators to avoid duplication, build shared strategic priorities and focus on effective reforms; (3) reduce regulatory compliance burdens and costs by allowing entities to allocate their resources more efficiently when implementing regulation; and (4) provide financial services providers with a better view of regulatory changes that might impact their businesses and support engagement with proposed reforms and their implementation. The grid will be established and administered by the Treasury, and will include proposed legislation, rules, regulations, standards, consultation processes, and data collection processes. See Treasury media release .
ASX seeks industry feedback regarding its proposed approach to deliver CHESS replacement. On 14 March 2024, ASX published a public consultation paper seeking stakeholder feedback on its proposed two-tranche implementation strategy for the delivery of a replacement to CHESS. As discussed in a previous edition of Boardroom Brief , ASX announced in November 2023 that it would implement a new platform in two main releases, with the clearing service to be delivered in a first release and the settlement and subregister services to follow in a second release. The consultation relates to the scope and approach for the first release, including testing requirements and readiness activities. See ASX media release . Submissions on the consultation paper for the first release close on 24 April 2024.
LEGAL
Takeovers Panel receives application in relation to the affairs of Pact Group. On 15 March 2024, the Panel received an application from Manipur Nominees Pty Ltd, Shriar Consolidated Pty Ltd, Stanningfield Proprietary Limited and Gandur Superannuation No. 3 Pty Ltd (the Applicants) in relation to the affairs of Pact Group. Pact Group is currently the subject of an off-market takeover bid by Bennamon Industries Pty Ltd (Bennamon), a wholly owned subsidiary of Kin Group Pty Ltd (Kin Group). Kin Group had sent an email with the subject line “KIN GROUP PLANS TO DELIST PACT GROUP” to certain shareholders who had not accepted the bid, which the Applicants allege they did not receive. The Applicants submit that that email: (1) contained misleading statements and/or was confusing; (2) coerced or may coerce shareholders who would have not otherwise accepted the bid to accept; and (3) constituted a threat of an imminent delisting to coerce shareholders to dispose their interest contrary to section 602(a) of the Corporations Act 2001 (Cth). The Applicants seek certain orders, including final orders vesting the shares acquired by Bennamon on market to be vested in ASIC for resale. On 18 March 2024, the Panel made interim orders restraining Bennamon from processing any acceptances received from Pact Group shareholders under the bid for Pact Group. See Takeovers Panel media release (application) and interim orders .
RISK RADAR
The spectre of litigation risk cast over mandatory climate-related disclosure regime. The proposed Australian mandatory climate disclosure regime has received overall support from key organisations including the Business Council of Australia and, most recently, the AICD. On 13 March 2024, the AICD published its view on mandatory climate reporting in Australia. The AICD referred to Treasury’s draft mandatory reporting bill published on 12 January 2024 (see previous edition of Boardroom Brief ), under which entities could be provided with immunity from certain proceedings when making disclosures about scope 3 emissions or scenario analysis statements in Sustainability Reports for financial years commencing between from 1 July 2024 to 30 June 2027. The AICD expressed concern that the omission of forward-looking disclosures from the limited immunity three-year regulator-only enforcement period (including transition plans) will leave companies vulnerable to private litigation in a disclosure area marred by significant uncertainty and litigation risk. The AICD further considers that ‘given the nascent and inherently uncertain nature of climate-related disclosures and that consideration that reasonable assurance over all disclosures is not required until 1 July 2030, director declarations should be suitably qualified Unreserved statements of compliance in the absence of assurance cannot be provided ’. See AICD webpage . Directors should ensure their Boards are appropriately advised as the climate-related disclosure regime continues to evolve.