Our advocacy team's key projects.
Public sector audits
The NSW Government has released a consultation draft of its Internal audit and risk management policy for the NSW public sector.
Critical to the Government’s proposal is a requirement that audit and risk committees be wholly independent.
While the Australian Institute of Company Directors supports the notion that audit committees should be independent, we are concerned as to what the Government means by “wholly independent” when setting out who should be appointed to an audit and risk committee. In our view, the audit and risk committee could have a majority of independent directors and not be solely constituted with independent directors.
We are also concerned that the policy would require audit committee members to be registered and meet the Government’s independence requirements. We believe this is overly prescriptive and could exclude experienced directors from contributing to the public sector..
Why the HRDD?
Why is the honest and reasonable director defence (HRDD) necessary?
There are a number of significant pressures which create a risk-averse corporate culture in Australia.
This environment is a disincentive for directors to make decisions that would encourage the entrepreneurialism and innovation that stimulates economic growth.
Existing mechanisms to help protect honest and diligent directors (such as the business judgment rule) have not proved effective.
The aim of the proposed reform is to overcome these pressures to allow directors to focus on their real tasks of monitoring performance, strategic oversight and governance.
Share scheme changes good news for start-ups
The Australian Institute of Company Directors has commended the proposed repeal of changes introduced in 2009 to the tax deferral arrangements under employee share schemes and the introduction of tax concessions for shares and options granted to employees of start-up companies.
However, we have submitted to the Government that it can further improve the tax treatment of employee share schemes by:
• Addressing the triggering of tax liability in respect of unvested or restricted securities under an employee share scheme on cessation of employment to encourage holding of securities by former employees.
• Allowing for greater flexibility for security grants to employees and directors of start-up companies by loosening some of the conditions that apply under the current proposal (for example, the requirement that the grants be offered to at least 75 per cent of the company’s employees and that the securities must not vest earlier than three years).
ASX responds to David Jones controversy
Following a highly publicised incident involving David Jones last year whereby two directors acquired company shares at a time when it appeared that they may have held inside information, the Australian Securities Exchange (ASX) has substantially updated its guidance note on securities trading policies.
The Australian Institute of Company Directors participated in a roundtable held by the Australian Securities and Investments Commission in March 2014, which concluded no changes to the regulatory framework were warranted. ASX has nonetheless significantly expanded its guidance note to help listed companies comply with its listing rules.
It’s pleasing, given the isolated nature of the incident, that no additional regulation has been introduced. All roundtable participants, including investor bodies, agreed this was appropriate.
However, ASX’s additional guidance reflects the importance of boards ensuring the processes for approving share trades, particularly by directors and senior executives, include the consideration not just of whether a director or executive is likely to have insider knowledge, but also of how the trades are likely to be perceived by the public.
For further information refer to the updated guidance note from the ASX website.
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