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 decision of the Australian Securities and Investments Commission (ASIC) to lift an interim stop order placed on an entitlement offer made by Rhinomed Limited (Rhinomed) and trends revealed by ASX’s Monthly Activity Report for July 2024. We also discuss the decision of the Federal Court of Australia imposing a $5 million penalty on Noumi Limited (ASX: NOU) (Noumi) for breaches of its continuous disclosure obligations.

In Over the Horizon, we examine the recent decision by the Reserve Bank of Australia (RBA) to keep the cash rate of 4.35% unchanged and the implications of that decision.

Regulation

ASIC lifts interim stop order after Rhinomed Limited addresses disclosure concerns

On 7 August 2024, ASIC announced that it had revoked an interim stop order placed on an entitlement offer made by Rhinomed under a prospectus lodged with ASIC on 27 June 2024. The regulator had placed the stop order on the entitlement offer because it had concerns that Rhinomed’s prospectus did not adequately disclose certain information required by the Corporations Act 2001 (Cth) (Corporations Act) in relation to Rhinomed’s historical financial information, existing loan arrangements, the use of funds raised under the entitlement offer, and Rhinomed’s plans to pay current liabilities and fund operations following the completion of the entitlement offer. The stop order was revoked after Rhinomed lodged a replacement prospectus with ASIC addressing the regulator’s concerns. ASIC’s disclosure concerns on prospectuses and other disclosure documents are usually resolved during the exposure period for the document: this matter serves as a reminder that ASIC is also willing to use its stop order power in appropriate circumstances and highlights the importance of a rigorous due diligence procedure to ensure that disclosure documents contain all information required by the Corporations Act.

ASX publishes Group Monthly Activity Report for July 2024

On 6 August 2024, ASX published its Group Monthly Activity Report for July 2024. Notably, ASX reported a drop in the number of companies listed on the ASX compared to the previous corresponding period, from 2,247 to 2,154, exacerbated by M&A activity and a somewhat anaemic IPO market over the past 12 months. Increasingly it seems listed assets are finding their way to strategic acquirers and private pools of capital, which has considerable implications in terms of governance and transparency in the management of those assets. 

Legal

Noumi Limited ordered to pay $5 million penalty for breaches of its continuous disclosure obligations

On 5 August 2024, the Federal Court of Australia published the decision of Jackman J in which his Honour imposed a $5 million penalty on Noumi for breaches of its continuous disclosure obligations under the Corporations Act. His Honour found that Noumi, which was formerly named Freedom Foods Limited, failed to disclose certain material financial information to the market, with the result that its FY19 and FY20 Financial Reports did not give a true or fair view of its financial position and performance. Noumi admitted to these contraventions. Its shares were suspended from quotation on ASX from 25 June 2020 until 19 March 2021 pending the resolution of its financial affairs, and its share price fell approximately 82.39% in the first trading day following the release of corrective disclosure. ASIC Deputy Chair Ms Sarah Court highlighted that continuous disclosure failures ‘not only cause harm to investors by denying them the information they are entitled to, they also erode confidence in Australia’s financial markets’. The proceedings commenced by ASIC against Noumi’s former managing director and CEO Mr Rory Macleod and former CFO Mr Campbell Nicholas for alleged continuous disclosure failures, breaches of director and officer duties, and engaging in false or misleading conduct, are ongoing. 

Over the Horizon

Interest rates, inflation and government spending: not going down

On 6 August 2024, the RBA published its Statement on Monetary Policy and announced at their media conference that the RBA had decided to leave the cash rate of 4.35% unchanged. RBA Governor, Ms Michele Bullock, noted in clear terms that while the current rate was “appropriate for balancing our inflation and employment objectives, … there is still some considerable uncertainty about the outlook”. Ms Bullock also noted the RBA’s firm concerns that inflation still remains too high and that while the RBA is still striving to target an inflation rate between the 2 to 3 per cent range, there is no guarantee that supply and demand across Australia will return to balance quickly enough, especially where productivity growth continues to remain slow. In broad terms, as some commentators have noted, this reflects a judgement that the Australian economy’s capacity to meet domestic demand has been weaker than previously thought – with inflation to linger until the end of 2026. The RBA noted in its Statement on Monetary Policy that while headline inflation may temporarily be reduced as a result of the government’s cost of living subsidies, inflation will spike again following the end of those measures. The RBA’s position is increasingly at odds with the Federal Treasurer, Dr Jim Chalmers’ view that the Federal Government’s cost of living relief has put “downward pressure on inflation, not upward”.