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 examine recent trends in gender diversity on ASX300 boards, and calls by the Australian Competition and Consumer Commission (ACCC) for businesses to address unfair contract terms pending the introduction of new penalties. We also discuss the consultation paper released by Australian Securities and Investments Commission (ASIC) in relation to the duty on directors to prevent insolvent trading, as well as Beach J’s decision in Re Newcrest Mining Ltd, which dismisses recent calls for the Federal Court of Australia to issue a practice note in relation to applications for an order convening a scheme meeting, and related evidentiary requirements.
In Over the Horizon, we discuss comments by the Executive Director of the International Energy Association (IEA) concerning the earlier-than-expected projected global peak in fossil fuel consumption this decade.
GOVERNANCE
Study reveals highest female representation on ASX300 company boards to-date. On 11 September 2023, governance advisory firm Ownership Matters released a report titled “Board composition, director pay and ‘skin in the game’ in the ASX300” (Report) which analyses trends in the composition of ASX300 company boards in the 2022 calendar year. The Report found that females held a record 34.2% of board positions across the ASX300 (up from just 9.6% in 2005) after 40 new female roles were added in the last two years. In addition, there are currently no all-male boards in Australia’s top 200 public companies. However, the Report also noted that, of the 290 companies sampled, only 33 had a female chair, and only four companies across the ASX300 had both a female chair and CEO. Ownership Matters director Dean Paatsch stated that these results indicate that “[t]he men are allowing record numbers of female directors into the tent, but are yet to meaningfully hand over the best paid chairing roles ”. See Ownership Matters media release .
REGULATION
ACCC urges businesses to remove unfair contract terms ahead of legal reforms. On 11 September 2023, the ACCC issued a media release warning businesses to thoroughly scrutinise their standard form contracts and promptly rectify or remove any unfair contract terms before new penalties take effect. This warning comes in anticipation of upcoming changes to the Australian Consumer Law, set to take effect on 9 November 2023, which will make it unlawful for businesses to propose, employ, or rely on unfair contract terms within their standard form contracts when engaging with consumers and small businesses. As discussed in a recent G+T Knowledge article , the legislative changes will introduce substantially increased penalties for failures to comply. Presently, no punitive measures exist for unfair contract terms. Courts can only declare specific contract terms unfair and, therefore, void. Recent regulatory action, such as the proceedings commenced by ASIC against PayPal Australia Pty Limited in the Federal Court of Australia over unfair contract terms (see ASIC media release ), underscore the urgency for businesses to re-evaluate the fairness of their standard form contracts. Directors of companies with customer-facing standard terms of business or contracts should note that failure to proactively address potentially unfair contract terms may now result in significant consequences once the new legislation takes effect. See ACCC media release .
ASIC consults on guidance relating to the duty on directors to prevent insolvent training. On 14 September 2023, ASIC published Consultation Paper 372 Guidance on insolvent trading safe harbour provisions: Update to RG 217 . The paper seeks feedback on ASIC’s proposed amendments to Regulatory Guide 217, which provides guidance relating to the duty on directors to prevent insolvent trading. ASIC proposes to: (a) provide guidance for directors about key principles they should consider in carrying out this duty; (b) update existing guidance to include information about when a holding company might be liable for debts incurred by a subsidiary company when the subsidiary continues to trade while insolvent; and (c) provide information and guidance about the operation of safe harbour provisions, and factors that the regulator will consider when assessing whether these provisions are applicable to a director. This consultation comes after an independent review of the safe harbour provisions in the Corporations Act 2001 (Cth) in March 2022 identified a lack of awareness and understanding by directors of their duty to prevent insolvent trading. Industry and other interested stakeholders are invited to comment on ASIC’s proposed amendments to Regulatory Guide 217 by 26 October 2023. See ASIC media release .
LEGAL
Federal Court judge dismisses calls for guidance on applications to convene a scheme meeting. On 11 September 2023, the Federal Court of Australia published Beach J’s reasons for the decision in Re Newcrest Mining Ltd [2023] FCA 1080, in which his Honour dismissed suggestions that the Court should issue a practice note setting out the Court’s expectations in relation to applications for an order convening a scheme meeting, and the requirements around supporting evidence. As noted in last week’s edition of Boardroom Brief , several recent Federal Court decisions have sought to clarify and simplify evidentiary requirements throughout the scheme process. Justice Beach stated that, in his opinion, “no cookie-cutter procedures practice note is necessary in this niche area of commercial law, where practitioners are highly skilled and where judicial requirements for applications and evidence demand and prize flexibility”, and that practice notes “have little merit in specialised areas of commercial law involving low volume complex cases ”. This position is consistent with Beach J’s comments earlier this year at the second court hearing in Re Oz Minerals Limited , which were discussed in a G+T Knowledge article . His Honour ultimately made an order that Newcrest Mining Limited (Newcrest) convene and hold a scheme meeting to consider and approve the proposed scheme of arrangement to effect the acquisition of Newcrest by Newmont Corporation, despite the fact that the independent expert concluded that the proposed scheme was not fair, but was reasonable and in the best interests of Newcrest shareholders. See Re Newcrest Mining Ltd [2023] FCA 1080.
OVER THE HORIZON
International Energy Association predicts fossil fuel usage to peak this decade. On 12 September 2023, Dr Fatih Birol, Executive Director of the IEA, stated in an article published in the Financial Times that global demand for oil, gas and coal is set to peak this decade, which is earlier than anticipated, and that “the world is on the cusp of a historic turning point” as a result . Dr Birol stated that “this is the first time that a peak in demand is visible for each fuel this decade ”, and this indicated that the shift to cleaner and more secure energy systems is making significant headway. However, this projected change in demand raises important issues. Firstly, according to the IEA, the projected decline in fossil fuel usage “is nowhere near steep enough ” to cap global warming to 1.5 degrees Celsius. Further, while advanced economies are expected to reduce their reliance on fossil fuels, some emerging and developing economies are expected to consume record-levels of certain fossil fuels, particularly gas, in the same timeframe. As a result, the expected decline in global fossil fuel consumption will not be linear, and continued investment into existing energy generation capacity will be critical to provide the necessary base-load energy supply as the world transitions towards net zero. The clean energy industry is an area of continual change, with recent years featuring rapid advancements in technological capacity, governmental policy and regulation. As indicated by Dr Birol, decision makers will need to be nimble to adapt to these changes, and to capitalise on the opportunities that the global clean energy transition presents. See news article .