This is a service specifically targeted at the needs of busy non-executive Directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this edition, we consider ASIC’s indicative timeline for climate-related disclosures becoming mandatory in Australia and the Takeovers Panel’s decisions in relation to the affairs of Virtus Health Limited and Bullseye Mining Limited. We also take a look at the NSW Supreme Court’s orders to convene shareholder meetings for the Virtus and AGL schemes of arrangement, as well as its decision in the Northside Veterinary Property case, which turned on the operation of sections 128 and 129 of the Corporations Act 2001 (Cth).
In Over the Horizon, we consider the results of the 2022 Federal Election.
GOVERNANCE & REGULATION
ASIC comments on Australia’s pathway to mandatory climate-related disclosures. As reported by The West and The Australian, ASIC Commissioner Sean Hughes has provided insight on what is to be expected in the realm of climate-related disclosure for public companies, indicating such disclosures may become mandatory “sooner rather than later”. At a Governance Institute of Australia event last week, Mr Hughes said ASIC wants to see a “sense of alignment” with regulators from other countries, noting New Zealand’s rapid movement towards reforms as well as ASIC’s close discussions with Singapore, Canada and other major trading partners. Mr Hughes also reinforced ASIC’s commitment to addressing greenwashing, recognising such misleading statements could damage “confidence and trust” in the corporate system. The Commissioner highlighted the outcome of the Federal election will be telling of the “political appetite” for procedural reform. Given the support for more aggressive climate change policy evidenced by the weekend’s Federal election, Directors should be alert to the possibility of additional regulation in this area.
Court orders to convene Scheme meetings represent a significant step forward in some high profile schemes. Justice Black of the Supreme Court of New South Wales has this month made orders in respect of convening shareholder meetings to discuss the proposed schemes of arrangement between Virtus Health Limited (Virtus) and Evergreen BidCo Pty Ltd (CapVest Scheme), and in relation to the demerger of AGL Australia Limited by AGL Energy (AGL Demerger). In making orders for Virtus to hold an EGM in relation to the CapVest Scheme, Justice Black highlighted the complexities arising from disclosure being made in a single transaction booklet where the parties are undertaking a simultaneous scheme and takeover bid. His Honour also stated that he would have declined to convene the meeting if the transaction booklet had remained subject to a condition that the capital reduction remain subject to the reconstituted board determining to pay it. In relation to the AGL Demerger, his Honour considered a shareholder’s objection to the convening of a meeting on the basis that there was insufficient disclosure of alternates to the demerger. His Honour considered that the demerger booklet did provide adequate disclosure and ordered the meeting be convened. The decisions show that the Court plays an important and active role in complex schemes. With this in mind, it will be interesting to see whether there is appetite for a transfer of scheme review responsibility to the Takeovers Panel, a question on which Treasury, under the previous government, has sought submissions. See the Treasury Consultation Paper.
NSWSC finds contract for sale is binding based on statutory assumptions. The Supreme Court of NSW has found that a contract for the sale of land entered into between Northside Veterinary Property Pty Ltd (Northside) and Dalmacija Sydney Croatian Club Ltd (Club) was enforceable, despite the Club submitting that the person who signed on behalf of the Club lacked actual or ostensible authority to bind the Club to the contact. The case illustrates the operation of sections 128 and 129 of the Corporations Act 2001 (Cth) which entitle a person dealing with a company to assume that the company’s constitution has been complied with and that the agents acting for the company or signing documents on the company’s behalf have the authority to do so. The Court found, among other things, that a resolution passed at the Club’s AGM was sufficient to confer authority upon the board to sell or lease the property. The statutory assumptions protected Northside’s in good faith dealings with the Club, who had not properly attended to its internal procedures. This case serves as a reminder to Directors to closely monitor delegations of authority or agency arrangements in place, particularly when such delegates or agents may execute documents on behalf of the company. See the NSWSC decision.
Takeovers Panel refuses to conduct proceedings on review application from Virtus Health Limited. In last week’s edition of Boardroom Brief, we considered the Takeovers Panel’s decision to decline to conduct proceedings in relation to BGH Capital Pty Ltd’s bidders’ disclosures (BGH Bidders). The day after such decision, Virtus Health Limited (Virtus) submitted a further application seeking review of the Panel’s decision. The Panel conceded the BGH Bidders’ dispatch of its bidders’ statement without first lodging and sending with it a supplementary bidders’ statement to disclose the revised proposal by CapVest Partners LLP was not considered good disclosure, although not unacceptable in light of the information already available to Virtus shareholders. Further, the Panel considered that it was not clear that any Virtus shareholder was actually misled by any misleading or deficient disclosure by BGH Bidders. As such, the Panel declined to conduct proceedings. See the Panel’s media release.
Takeovers Panel makes declaration of unacceptable circumstances in relation to affairs of Bullseye Mining Limited. In a previous edition of Boardroom Brief, we considered Hongkong Xinhe International Investment Company Limited’s (Xinhe) application in relation to the affairs of Bullseye Mining Limited (Bullseye). To recap, Bullseye is currently the subject of takeover bids by Emerald Resources NL (Emerald) and Au Zingao Investment Pty Ltd (Xingao). The Panel considered that delays and material deficiencies in disclosure gave rise to unacceptable circumstances and as a result, the acquisition of control of Bullseye shares had not taken place in an efficient, competitive and informed market. Further, the Panel considered that Bullseye shareholders were not given enough information to enable them to assess the merits of either Emerald’s proposal or Xingao’s proposal. Notably, the Panel clarified that classification of a risk as “a theoretical risk” and there being “no certainty as to whether or not this may occur” is not a sufficient basis for not disclosing that risk; rather this is the nature of a risk. This comment should be front of mind for Directors when considering risk disclosure in any public document. Additionally, the Panel confirmed its expectation that where a Board recommendation is not unanimous (including where a director abstains from voting due to unpreparedness) the fact that the recommendation is not unanimous should be noted. See the Panel’s Reasons for Decision.
OVER THE HORIZON
2022 Election reflective of shift in Australian politics. Anthony Albanese has been sworn in as Australia’s 31st Prime Minister, marking the first time in nine years that Australia has had a Labor Government and only the third time since the Second World War that Labor has won government from opposition. Labor seems likely to form government with around a third of first-preference votes, the lowest on record, reflecting diminishing support for the major parties and the rise of the Greens and well-funded, mainstream independents as a political force. The market’s attention is likely to turn very quickly to climate change policy, which was a centrepiece of the so-called “Teal Movement’s” collective platform. Whether the change of Government will be perceived as a positive or negative for the corporate sector remains to be seen, but there will almost certainly be both winners and losers, which may drive deal activity. However, other than this, and putting aside the issue of a Federal anti-corruption body, the election was largely fought on a narrow policy battlefield, with few new, meaningful positions taken on core issues of economic management, including tax reform, industrial relations and the now $1 trn-plus national debt.