After more than six months since the announcement by the Federal Government of its intentions to cut red tape for businesses and the subsequent release of exposure draft legislation, the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 (Bill) has been introduced into Parliament.
The Bill was introduced to Parliament last week and proposes to streamline and improve certain aspects of the operation of business and government processes under the Corporations Act 2001 (Cth) (Corporations Act). Although these amendments aim to cut red tape, there are only two substantial changes, and as such, companies which are not affected by these provisions may be left scratching their heads as to the benefit.
In this Alert, Partner Nicole Radice and Trainee Solicitor Kaitlyn Rafter explore the following major changes proposed by the Bill:
- repeal of the 100 Member Rule; and
- amendments to disclosure requirements of executive remuneration.
Requesting a General Meeting
If the Bill is passed, the ability of 100 shareholders of a company to have directors call a general meeting will be removed (the 100 Member Rule). This will reduce the onerous expenses involved in calling general meetings in circumstances where the 100 Member Rule is being used vexatiously or frivolously, for example where the 100 members are a relatively small percentage of shareholders. This amendment seeks to better balance the interests of minority shareholders with the interests of the company as a whole.
No changes have been made to the rights of 100 shareholders to propose resolutions for a meeting's agenda, or to circulate material to other members. Further, shareholders (or groups of shareholders) with at least five percent of a company's voting entitlements are still able to request that directors hold a general meeting, ensuring minority shareholder interests are still able to be represented.
Remuneration Reporting
The Bill proposes to amend remuneration reporting so that information which may be of limited use or value to shareholders would not be required in a company's remuneration report. Specifically, companies would no longer be required to disclose the value of options held by executive personnel that have lapsed during the financial year, however would still need to disclose the number of lapsed options. Further, the requirement to disclose the percentage value the options reflect of an individual's total remuneration would not need to be reported by the company.
It is also proposed that an unlisted disclosing entity would not need to prepare a remuneration report at all.
If passed, these amendments would take effect for the financial year ending immediately after the commencement of the Bill.
Dividend Payments Test
On 10 April 2014, an exposure draft of the proposed legislation was released for comment which included changes to the test for when a company can pay dividends under section 245T of the Corporations Act. These proposed amendments have not been included in the Bill, and as a result, the current test for paying dividends will remain – at least for now.
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