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.
It has been a busy few months for the Takeovers Panel, so, in this edition, we discuss various announcements by the Panel in relation to the affairs of Energy Resources of Australia Limited (ASX: ERA) (ERA), AIMS Property Securities Fund (ASX: APW) (APW) and Tissue Repair Ltd (ASX: TRP) (TRP).
In Risk Radar, we discuss the Federal Government’s policy on the responsible use of artificial intelligence (AI) in government which came into effect on 1 September 2024.
Legal
Takeovers Panel publishes reasons for declining to conduct proceedings in relation to the affairs of Energy Resources of Australia Limited
On 28 August 2024, the Panel published the reasons for its decision to decline to conduct proceedings in relation to the affairs of ERA. As discussed in a previous edition of Boardroom Brief , Zentree Investments Limited (Zentree) brought an application to the Panel following ERA’s announcement of a potential capital raise. Zentree alleged that Rio Tinto Limited, which has voting power of 86.3% in ERA, had employed an unacceptable long-term strategy whereby it would acquire 100% ownership of ERA without being required to pay a premium for control to minority shareholders. The Panel considered that Zentree’s application was premature because the size, structure and terms of the proposed equity raise had not been finalised and announced by ERA. Accordingly, there was no certainty that any unacceptable circumstances would arise, and the Panel considered that there was no reasonable prospect that it would make a declaration of unacceptable circumstances.
Takeovers Panel declines to conduct proceedings in relation to the affairs of AIMS Property Securities Fund and receives review application
On 29 August 2024, the Panel announced that it had declined to conduct proceedings on an application in relation to the affairs of APW. As discussed in a previous edition of Boardroom Brief , the Application was brought by Mr Benjamin Graham atf the Graham Family Trust and Mr Warwick Sauer in his personal capacity and as a director of Baauer Pty Ltd atf the Baauer Family Trust (together, the Applicants) concerning alleged undisclosed associations between certain unitholders in APW. The Panel considered that, among other things, the Applicants did not provide a sufficient body of material to justify further enquiries into the alleged associations, and declined to conduct proceedings. On 30 August 2024, the Panel announced that it had received an application from the Applicants seeking a review of the Panel’s initial decision. A review Panel has not yet been appointed, and the Panel has not decided whether to conduct proceedings.
Takeovers Panel receives application in relation to the affairs of Tissue Repair Ltd
On 29 August 2024, the Panel announced that it had received an application from TRP in relation to its affairs. TRP's application concerned alleged undisclosed associations between certain TRP shareholders (Requisitioning Shareholders) who were seeking to change the composition of TRP’s board and to control or influence the conduct of its affairs via notices under sections 249D and 203D of the Corporations Act. The notices given to TRP were purportedly executed by the Requisitioning Shareholders who asserted that they collectively controlled more than 50% of TRP’s voting shares. TRP submits that the Requisitioning Shareholders had a relevant agreement to seek to restructure TRP’s board and have failed to disclose any combined voting power, relevant interests, or association. TRP seeks (amongst other things) final orders that: (1) relevant agreement be cancelled; (2) the Requisitioning Shareholders make disclosure of their alleged association; and (3) any TRP shares acquired during the association vest in ASIC for sale. A sitting Panel has not been appointed and no decision has been made whether to conduct proceedings.
Risk Radar
Policy for AI in the Australian Government
The Federal Government’s Policy for the responsible use of AI in government came into effect on 1 September 2024. The core component of the policy is that all non-corporate Commonwealth entities (such as those identified in the Department of Finance’s chart ) must: (1) appoint and designate a person within 90 days of the policy taking effect who will be responsible for implementing the policy in their organisation as outlined by the Standard for accountable officials ; and (2) publish an ‘AI transparency statement’ within six months of the policy taking effect which must outline the organisation’s approach to AI adoption and use as outlined by the Standard for transparency statements . While the Government’s move to address key accountability issues for the use of AI in its workings is laudable, concerns remain. Notably, the appointees must be in place by the end of November 2024 and the transparency statements must be in place by the end of February 2025, which is expected to result in a diversion of the most capable AI-equipped talent away from the already very small pool from the private sector into the government. It is also reasonably likely that the state governments will follow suit, exacerbating the problem. Companies that engage in the provision of services to all levels of government (not just Federal) should be mindful that these newly appointed AI designates may demand greater visibility and transparency over the company’s own AI governance frameworks to ensure that they can swiftly accommodate changes to policies.