Corporate Alert

ASIC Class Order Relief for MIS Pricing Decisions

On 22 December 2005, ASIC issued a class order which permits responsible entities of registered managed investment schemes to exercise certain discretions when making pricing decisions.

ASIC was of the view that the Corporations Act required MIS constitutions to set out the issue prices and withdrawal amounts in a way that enabled the amounts to be objectively determined. It has been common industry practice for these amounts to be calculated subject to a formula that allowed or required the responsible entity to exercise a degree of discretion, which in ASIC’s view meant that the constitutions did not comply with the law.

Interim relief previously issued by ASIC enabled MIS constitutions to comply with the law. The new class order varies the interim relief and sets out the conditions that responsible entities must comply with, including in respect of documentation and how they may exercise their discretion.

Responsible entities have until 1 May 2006 to comply with the requirements. The Phillips Fox team can provide advice on how constitutions and practices may need to change to take advantage of the class order.

For further information, please contact the author:

Jamie Motum
Tel + 61 2 9286 8232
jamie.motum@phillipsfox.com

Disclosure and Reporting of Remuneration Information: Recent Changes

ASX listed companies are required by s300A of the Corporations Act 2001(Cth) to disclose details of the remuneration packages of directors and executives and the policy for determining remuneration in an attachment to the Director’s Report issued with the Annual Report.

As part of the CLERP 9 law reform package, s250R(2) was inserted into the Act which requires that the adoption of the remuneration report by a listed company is put to a non-binding vote at the AGM. A non-binding vote does not confer power on the shareholders to determine the proposed remuneration package of directors and executives being adopted by the company, however, ASIC’s view is that ‘good corporate governance requires that a company explains to its shareholders what action, if any, it intends to take in response to a negative vote’.

The ASIC investigation into Novogen Ltd is indicative of the approach to the introduction of this provision. In this matter, despite the large number of negative proxy votes in response to the remuneration resolution, the vote was conducted as a show of hands at the general meeting rather than a poll, and the results were reported as a percentage of share capital rather than votes.

ASIC’s view is that this misrepresented the shareholder’s response to the resolution. ASIC has also indicated that the remuneration report resolution must be included in the notice of the meeting and a company will not comply with its obligations by simply mentioning the report in passing at the AGM.

2. Reporting of remuneration information to shareholders AASB 1046 requires ASX listed companies to report the details of directors’ and executives’ remuneration and the board’s policy for determining remuneration in the financial report. S300A of the Act requires this information to be reported in an attachment to the directors report. This creates duplication of the information provided to shareholders and is an unnecessary administrative burden on the company.

ASIC Class Order CO 06/50 allows listed companies to report remuneration information only in the directors report. The Class Order came into application in December 2005 and replaced Corporations Regulations (which had the same effect). The remuneration report must still comply with the information requirements in AASB 1046 and a separate statement of the auditor’s opinion on this information is also required in the auditor’s report.

For further information, please contact the author:

Mark Burger, partner
Tel + 61 3 9274 5586
mark.burger@phillipsfox.com

Reform to Meeting Procedures

Significant amendments proposed by the Corporations Amendment (No. 2) Bill 2005 aim to address concerns in relation to meeting procedures of listed companies.

The intended effect of the amendments is to facilitate increased shareholder participation in corporate governance, while reducing the associated costs of such participation. One of the more significant amendments that may be perceived as long overdue, is to section 249 of the Corporations Act 2001. The amendment removes the ‘100-member rule’ that currently permits 100 members to requisition a shareholders’ meeting at the expense of the company. The rule has been criticised in the past for giving disproportionate influence to minority shareholders, failing to recognise the substantial size differences between companies and for being out of step with comparative laws in other jurisdictions such as the United Kingdom, Europe, Canada and New Zealand.

Submissions made to the Treasury in relation to the Exposure Draft have supported the repeal of this provision. Other significant amendments are proposed with a primary focus on increasing shareholder participation. The amendments have the effect of making it easier for shareholders to add resolutions to the agenda of the AGM, encouraging members to alert other members to issues, gain support for proposed resolutions, and facilitating electronic receipt of notices of meetings, resolutions and statements.

The Government is currently considering the submissions received and expect to finalise the Bill by May 2006. It is likely that it will be introduced into Parliament in May or June 2006.

For further information, please contact the author:

Mark Burger, partner
Tel + 61 3 9274 5586
mark.burger@phillipsfox.com

NZX Proposes Amendments to NZX Listing Rules

NZX has released an exposure draft of proposed amendments to the Listing Rules of the NZ Equity Security Market/NZ Debt Security Market (NZSX/NZDX), and the Listing Rules for the NZ Alternative Market (NZAX). This exposure draft is the product of consultation carried out by NZX towards the end of last year.

The period for commenting on the exposure draft has closed. NZX is now finalising the amendments for submission to the Minister of Commerce. NZX will separately advise the commencement date for the changes which is expected to be at least two months away.

The more significant matters included in the exposure draft are:

• A change to the closing date for director nominations to 35 business days before the annual meeting (previously two months).
• Changes to the rules governing offers of securities to existing security holders for amounts up to $5,000.
• Deletion of the rule that prevents issues of securities to employees without shareholder approval in a five year period exceeding 7% of the total number of securities on issue. The 3% per year restriction remains.
• Extension of Rule 8.1.3 (relating to the price of voting securities) to convertible securities, including options.
• Improved guidance regarding transactions that require disclosure and what must be disclosed.
• Preliminary announcements of full and half year results will now need to include the information prescribed by NZX from time to time.

The next issue of our NZ Corporate Bulletin will include a detailed discussion of the changes. A copy of this Bulletin will be available on the Phillips Fox website at http://www.phillipsfox.com/publications/RecentPublications.asp .

For further information, please contact the author:

Tim Matthews, senior associate
Tel +64 4 474 3204
tim.matthews@phillipsfox.com

Insolvency Law Reform Bill (NZ) Introduced

At the end of 2005, the Insolvency Law Reform Bill was finally introduced into Parliament. The Bill is a culmination of a lengthy process which started in 1999 with the Insolvency Law Review.

The Bill includes the introduction of a voluntary administration regime for companies, similar to the one that exists in Australia. It also proposes similar tests for voidable transactions as used in Australia, stricter rules on the use of phoenix companies and rewrites the current personal insolvency regime in New Zealand, most significantly with the introduction of a no asset procedure as an alternative to bankruptcy.

For more information on the Bill, please refer to the NZ Corporate Law Update, which is available on the Phillips Fox website at http://www.phillipsfox.com/ publications/RecentPublications.asp.

For further information, please contact the author:

Kevin Sullivan, senior associate
Tel +64 4 474 3296
kevin.sullivan@phillipsfox.com

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.