Acting for You, February 2021

ASX Listing Rule changes: online forms, notification of security issues and corporate actions

Governance Institute made a submission to ASX on 24 December 2020 outlining members’ concerns with proposed Listing Rules changes regarding online forms, notification of security issues, and corporate action timetables. 

ASX’s proposed changes were primarily to facilitate new ‘Straight Through Processing’ (STP) online forms to streamline corporate action announcements. They concerned security issues, share buy-backs, the cancellation or deferral of previously announced dividends and interest payments, and other key corporate actions. ASX’s intention is that the new forms will improve the speed and accuracy of announcements and facilitate compliance with Listing Rules.

We raised the following issues in our submission: 

  • Proposed Listing Rule 3.10.3E Appendix 3H Notification of cessation of securities — while the proposed form is a useful addition, members consider there are some practical difficulties with introducing a requirement to notify ASX within five business days of the cessation of securities. Employees leave companies frequently leading to the lapse of rights under employee incentive schemes. Given that the numbers of securities involved is generally small there is the potential for a flow of this information which is of limited benefit to informing the market. We recommended that the requirement to notify ASX within five business days of the cessation of equity securities under the proposed Listing Rule 3.10.3E should be lengthened to notification on a quarterly or monthly basis and be subject to a materiality qualification.
  • Proposed Listing Rule 12.13 Changes in dividends, distributions or interest payments — ASX has confirmed that the practice of announcing an ‘estimate’ of a proposed dividend on the record date followed by an announcement of the final amount of the dividend can continue and is specifically covered by the Note to Listing Rule 3.21. Our submission noted the following concerns with the proposals:
    • In members’ experience there are a range of circumstances where an entity may announce a dividend or other payment covered by the Rule, but then determine not to make the payment. This may be because the board determines it would be imprudent to make the payment or it decides to make a lesser payment for capital management purposes. Neither of these reasons are ‘contrary to law’ the wording in the proposed Listing Rule, they are rather a board making a judgment in the best interests of security holders, a decision they are unlikely to make lightly.
    • There is frequently a delay of two to three months between the declaration of a dividend and the announcement of final results. An entity’s circumstances may change dramatically during this period leading its board to make a judgment, acting in the best interests of security holders, not to make a payment because of the entity’s changed circumstances. Again our members do not consider this situation is ‘contrary to law’.
    • The proposed Rule may also cause difficulties for listed regulated entities where a regulator may encourage, but not legally require, an entity not to pay a dividend. This can occur, even where the dividend has been announced, the entity meets the solvency test, and the directors consider it would be in the best interests of security holders to make the payment.

We recommended that where an entity’s circumstances have changed between the announcement of a payment and the due date for payment and the payment is not ‘contrary to law’, but the board has made a judgment in the best interests of security holders not to make the payment, the entity provide appropriate disclosure to ASX of its changed circumstances and the reasons for withdrawing the dividend or distribution.   

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  • Listing Rule3.8A Buy-backs and Listing Rule 3.10.3E Cessation of securities — ASX’s proposal would require lodgment of an Appendix 3H within five business days of the cancellation of the securities bought back. This is to replace the current requirement to lodge ASIC Form 484 immediately after the cancellation is submitted to ASIC. The Form 484 must be lodged within 28 days of a cancellation. This could potentially require an entity to lodge an Appendix 3H every five business days when it is actively buying back stock. Our members consider this would create an unnecessary burden given that it is largely an administrative task and there is daily disclosure to the market of the number of securities bought back. We recommended that ASX should require an entity to lodge an Appendix 3H no later than five business days after the relevant Form 484 is lodged with ASIC, instead of within five business days of the cancellation. We also advised ASX that our members consider the current Appendices 3C, 3D, 3E and 3F are all used at very specific points in a buy-back and that they do not consider that there is a benefit from combining these forms because entities would generally only use one section of a form at any point in time. 

Governance Institute will keep members informed on this matter.

Governance Institute will convene an industry roundtable in February 2021 to discuss the themes and issues emerging from the 2020 AGM season.

Virtual AGMs and electronic communication with shareholders

Given that the Treasurer’s Determination allowing virtual AGMs, electronic meeting-related and electronic signatures expires on 21 March 2021, Governance Institute is continuing to advocate strongly in support of amending the Corporations Act to make these measures permanent. Governance Institute will convene an industry roundtable in February 2021 to discuss the themes and issues emerging from the 2020 AGM season.

Governance Institute will keep members informed on this matter.

#fixfundraising campaign

In December 2020, it was announced that federal, state and territory governments had agreed to establish a cross-border recognition model to harmonise charitable fundraising laws, and to develop a framework to lift financial reporting thresholds. The announcement was made by the Council on Federal Financial Relations (CFFR), a sub-committee of National Cabinet, which has replaced COAG. CFFR has agreed to a cross-border recognition model. This reform option would remove the need for national fundraisers to register in each state and territory before they fundraise but may not alleviate the full regulatory burden on the sector. 

The #fixfundraising coalition, of which Governance Institute is a founding member welcomed this announcement but will continue to advocate for a nationally consistent and fit-for-purpose regulatory regime. Advocating for lasting reform in this area will be one of Governance Institute’s policy priorities for 2021.

Governance Institute will keep members informed on this matter.

Deregulation Task Force: Modernising Business Communications

At the end of December 2020 Governance Institute representatives attended a meeting with members of the Deregulation Task Force which sits within the Department of Prime Minister and Cabinet and reports to the Hon Ben Morton, Assistant Minister to the Prime Minister and Cabinet. The purpose of the meeting was to discuss ‘pain points’ members experience in the areas that the Task Force has identified as priority areas namely, physical signing and execution of deeds, physical identity verification and buying a property. Other issues identified by members at the meeting included unclaimed moneys, dealings with deceased estates, record keeping and interactions with regulators.

Treasury has issued a Consultation Paper on Modernising Business Communications: Improving the Technology Neutrality of Treasury Portfolio Laws. Governance Institute will make a submission on this issue. Governance Institute’s Chief Executive Megan Motto is a member of the Expert Panel advising the Task Force.

Governance Institute will keep members informed on this matter.

Recent advocacy activity

Submissions
Proposed Listing Rule changes: online forms, notification of security issues and corporate actions — 24/12/2020.

 

 

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