Debate is in progress around necessary securities class action reform, an AICD regulatory reset priority, writes Louise Petschler GAICD.
Change for the better Debate is in progress around necessary securities class action reform, an AICD regulatory reset priority, writes Louise Petschler GAICD.
One of the AICD’s regulatory reset priorities this year is Australia’s securities class action settings — to reduce the risk of opportunistic claims and lower the pressure on D&O insurance costs. Two relevant reform debates are underway.
Legislation is currently before the Senate that would make permanent the temporary COVID-19 measure to re-establish a fault component in breaches of Australia’s continuous disclosure laws. These changes would establish a mental element for breaches of continuous disclosure and misleading and deceptive provisions. This would be a more appropriate threshold than current strict liability settings for complex real-time disclosure judgements reviewed by plaintiff law firms and litigation funders in hindsight. The AICD supports these sensible reforms and has called on the parliament to pass the legislation.
The AICD strongly supports robust continuous disclosure obligations. Under these reforms, directors or companies that are negligent or reckless with respect to these obligations, or that knowingly seek to mislead the market, will face the full force of the law — as they should.
Litigation funder regulation is also under review. The government has introduced new licensing requirements for litigation funders and Treasury is currently consulting on a separate proposal to regulate a minimum return of class action proceeds — that is, to require a substantial majority of any settlement to flow to class members. The AICD supports the policy intent of the proposal and has previously recommended this be explored. This issue is broader than securities class actions and there are also important access to justice issues to be considered.
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AICD regulatory reset priorities
The AICD wants fair, fit-for-purpose and modern regulations that support diligent directors in governing for growth. Our current reform priorities include:
- Modernised corporate laws enabling virtual meetings and communications. The AICD recently welcomed the government’s exposure draft bill seeking to make permanent amendments to Corporations Act 2001 requirements, brought in during COVID-19, that will support companies to use technology to hold virtual and hybrid meetings, send electronic communications and execute documents electronically.
- Better-balanced director liability settings, supporting diligent directors to govern for growth.
- Reduced risk of opportunistic securities class actions.
- NFP funding reform and certainty, including fundraising reform.
The federal government is progressing with changes to ACNC Governance Standard 3, targeting promotion of unlawful activity by charities. The government has narrowed the scope of the regulations after concerns raised on an earlier consultation draft by stakeholders, including the AICD.
The amendments, to be made later this year, will put the onus on charities to ensure their resources are not misused to engage in or promote trespass, vandalism, theft or assault, and threatening behaviour, including minor offences. The changes could see charities deregistered by the ACNC where no offence has occurred at all — the Commissioner only needs to believe that the charity is “likely” to commit a breach. The AICD continues to have concerns about the broad discretion proposed for deregistration and will keep members informed of developments.
Separately, the AICD has welcomed the government’s announcement that reporting thresholds for ACNC-registered charities will be increased from 1 July 2022. Financial reporting thresholds for small charities will increase to under $500,000 annual revenue (from $250,000) and medium-sized charities will increase to under $3m (from $1m). The threshold for large charities will increase to $3m or more. These changes have the potential to reduce compliance costs for smaller charities (for example on requirements for review or audit).
Regrettably, different thresholds continue to be applied by state and territory governments. Harmonisation of thresholds and regulations (as well as fundraising laws) for charities, incorporated associations and NFPs should be an urgent priority across the nation.
As part of AICD’s ongoing commitment to the Australian not-for-profit sector, we are pleased to announce we have reopened our annual NFP Scholarship Program. This program aims to provide access to high-quality education for current directors of small NFP organisations and aspiring directors with a passion and commitment to the sector.
This year, we have been able to increase the number of fully funded scholarships for small NFPs from 130 to 200. Recipients will undertake our highly regarded Governance Foundations for NFP Directors short course held over 1.5 days between November 2021 and June 2022.
Chair’s Mentoring Program going strong after more than a decade
The AICD will launch the next iteration of the Chair’s Mentoring Program in early 2022, with applications opening on 2 August. We look forward to welcoming the next cohort of board-ready women to undertake the year- long program, which will connect them with some of Australia’s most experienced chairs and directors. The program has been running for more than a decade and its 343 alumni now sit on listed company boards across a range of sectors — including 11 who hold chair roles on the boards of ASX 200 companies.
ASX 200 gender diversity snapshot
(as at 31 May 2021)
Proportion of women directors
Number of boards with 30% or more women
Companies with one woman on the board
Company with all-male board
Companies with women chairs
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