Pre-budget submission to Treasury
Governance Institute lodged its pre-budget submission with Federal Treasury on 31 January 2020.
In our submission, we outlined our policies, which we argue are critical to fostering greater confidence in Australian capital markets, enhancing the performance of Australian organisations and substantially reducing the burden of continually increasing legislative and regulatory compliance. Above all, we believe that our policies have the capacity to improve Australia’s productivity and should be factored into the budget deliberations.
We recommended that the government:
- Facilitate corporate law and governance legislative reform by establishing an independent research-based reform body to advise government on corporate law and implement sound processes for the development, introduction and implementation of reforms.
- Update the Corporations Act 2001 (Corporations Act) to make it technology-neutral and shift it from its basis in a 'hard copy' 19th century world to a 21st century one. As a first step, streamline the Corporations Act to enable electronic or digital shareholder communications thus saving postage and printing costs and reducing paper waste.
- Reduce compliance costs and facilitate shareholder engagement by undertaking a wholesale review of corporate reporting, including remuneration reporting.
- Maintain momentum and funding for the Modernising Business Registers (MBR) Project and include company secretaries in the Director Identification Number (DIN) reforms.
- Ensure the competitiveness and efficiency of the financial markets by passing legislation to empower regulators to address any potential anti-competitive conduct in relation to the CHESS Replacement Project.
- Continue the reform of the whistleblower regime by enacting a stand-alone whistleblower protection regime (applicable to the private sector) in its own Act and establishing a lead agency to undertake the whistleblower protection role.
- Enhance productivity for the NFP sector by:
- assisting the sector to respond effectively to the bushfires and drought by reforming the fundraising regulatory regime through minor amendments to the Australian Consumer Law to ensure its application is clear and broad
- releasing the government response to the ACNC review as a priority
- including the company secretary on the ACNC register to assist in the ACNC register acting as a ‘one stop shop’.
We believe that our policies have the capacity to improve Australia’s productivity and should be factored into the budget deliberations.
Governance Institute has advocated for these reforms for some time.
One reform, that is progressing, is the MBR Project that we are pleased to report was granted funding in the 2019-20 Mid-Year Economic and Fiscal Outlook. This initial funding is to unify the Australian Business Register and 31 ASIC business registers onto a contemporary, digital registry system. Funding has been provided until July 2020 with further funding subject to announcements by government. The unified registers will be hosted on a new system that will be administered by the Commonwealth Business Registry Service at the ATO. The government may consider migrating other registers to the new registry platform in future.
The government aims to improve existing registry services to make it easier for businesses to transact with government. The current IT infrastructure underpinning the Australian government registry services was not designed to deliver contemporary digital services and needs to be modernised to meet the growing demand for these services now and into the future. The project has been included in the government’s Deregulation Taskforce as an important business reform initiative.
Part of the MBR project includes the introduction of a DIN, another reform for which Governance Institute has advocated for some time. Currently, directors may have multiple records within ASIC systems with no verification of identity for directors. Once the DIN has been introduced, a director ID will be issued from the MBR platform to directors who have had their identities verified. Regulators will be able to identify a director’s linkages to companies and their changes over time, providing full transparency.
As a member of the MBR Business Advisory Group, we have urged the government to maintain momentum and funding for these critical projects and to continue to maintain the existing registers until the new systems are in place.
Illegal phoenixing bill
The Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019 was passed by parliament on 5 February 2020 and received Royal Assent on 17 February 2020.
An important part of the illegal phoenixing reforms is aimed at preventing directors from backdating resignations to avoid liability for offending conduct, such as insolvent trading or transferring company assets to a phoenix company. Under the bill, if the resignation of a director is reported to ASIC more than 28 days after the purported resignation, the resignation takes effect from the day it is reported to ASIC. In addition, the resignation of a director of a company does not take effect if, at the end of the day that the resignation is to take effect, the company does not have at least one director.
Those wanting to lodge a resignation dated outside of the 28 day period will have to make an application to ASIC (if within 56 days after they stopped being a director) or the court (if within 12 months after the day they stopped being a director) to fix the resignation day as that when the person’s resignation takes effect. ASIC and the court have discretion to determine a director’s resignation date where there is sufficient explanation for the delay in notification or it is otherwise just and equitable to do so.
The amendments to the Corporations Act commenced on 18 February 2020 (with a 12-month delay on the director resignation provisions) and the amendments to taxation legislation will commence on 1 April 2020.
A review of the changes made by the Act is required to take place five years after the date of Royal Assent.
50 years of membership
Bill Pallister FGIA, a member of our Corporate and Legal Issues policy committee (CLIC), has recently reached a significant milestone. Bill, who will have worked at Governance Institute for 20 years in April this year, recently celebrated 50 years of Governance Institute membership. He has also been a member of CLIC for over 24 years and is still going strong.
Pre-budget submission to Treasury 31/01/2020