Corporations Legislation Amendments (Deregulatory and Other Measures) Bill 2014: Key Amendments

Yesterday, the Parliamentary Secretary to the Minister for Finance, Mr Michael McCormack, introduced the Corporations Legislation Amendments (Deregulatory and Other Measures) Bill 2014 (Cth) into the House of Representatives.  The Bill is part of the package of legislation that the Government has introduced under its “red-tape repeal” program.

In his second reading speech, Mr McCormack said that the Government estimated that the bill would reduce business compliance costs by around $14 million per year. The Bill was released in draft form for public comment in April this year and the majority of its amendments were largely supported by organisations including the Business Council of Australia, the Australian Institute of Company Directors and the Law Council of Australia.  The Bill makes a number of technical amendments to the Corporations Act 2001 (Cth) (“the Corporations Act”) and the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”).

Removal Of Provision Allowing 100 Shareholders To Call Meetings

A major change in the bill relates to section 249D of the Corporations Act, which currently gives 100 members entitled to vote the right to request that company directors hold a general meeting.  Companies have objected to this provision on the basis that this provision is unfairly weighted towards the rights of minority shareholders, particularly for companies who have a large number of members. 

The Bill continues to allow 100 shareholders to put resolutions on the agenda at general meetings and to circulate material to other members at the company’s expense.  Members who hold five per cent of voting shares may also still make a request to hold a general meeting.

Renumeration Reports

The Bill also makes two changes – it no longer requires renumeration reports for unlisted disclosing entities, and for listed companies it no longer requires the report to include information on the value of lapsed options held by key management personnel.   They will still be required to disclose the number of options granted that lapse during the financial year, and the financial year in which the lapsed options were granted.

Clarification of Length of Financial Year Provisions

The Bill also attempts to clarify changes that were made in 2010 to enable directors to select more flexible financial year-end dates, for example to accommodate week-based reporting practices.  The Bill does not technically make any amendments, but instead clarifies that the flexibility provisions in s 323D(2A) can be used regardless of whether in the previous five years the directors have shortened the financial year by up to seven days or to synchronise records (in subsections 323D(2), (3) and (4)).

Certain Companies Limited By Guarantee Exempted From Appointing Auditors

Previous amendments in 2010 removed the need for certain companies limited by guarantee to have their financial reports audited.  However, they are still required to appoint an auditor under the Act.  The Bill would remove this requirement for these companies only, with all other public companies still needing to appoint an auditor.  According to Mr McCormack “[t]his change is expected to predominately benefit companies with a not-for-profit focus.”

Removal of Geographic Restrictions on the Takeovers Panel

The Bill would insert two new subsections into the ASIC Act to cover a gap caused by geographical restrictions in the Act’s operation.  Currently. the Takeover Panel’s powers may only be exercised if all the members of the Panel are physically in Australia.  The proposed amendments will allow panel members to perform panel whilst also fulfilling professional obligations overseas.  There are no changes to the substantive powers of the panel.

Extension of the Remuneration Tribunal’s Responsibility

The Bill also amends the ASIC Act to allocate responsibility for determining the remuneration and terms and conditions of the Chairs and members of the Financial Reporting Council (FRC), the Chair of the Australian Accounting Standards Board (AASB) and the Chair of the Auditing and Assurance Standards Board (AUASB) to the Remuneration Tribunal (previously  the responsibility of the Minister for the Department of the Treasury).

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Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 (Cth), Explanatory Memorandum and Second Reading Speech - available from TimeBase's LawOne Service