Australian shareholders ask for easier resolution procedures

The Australian federal government has mooted a draft bill which, if it succeeds, will remove the right of a 100 shareholders to call an extraordinary general meeting (EGM).

According to the announcement from Mathias Cormann, acting assistant treasurer, the draft bill contains proposed changes to the Australian corporations act that are aimed at removing “unnecessary regulation and clarify existing regulatory obligations.”

The key proposals of the Bill will, if passed have the following impact on quoted companies:

  • remove the obligation to hold a general meeting on the request of 100 shareholders;
  • require companies to include a general description of their remuneration governance framework, to the extent that it is not included elsewhere in the annual report;
  • remove the requirement to disclose the value of options granted to key management personnel, replacing it with a requirement to disclose the number of lapsed options and the year in which they were granted;
  • relieve certain disclosing entities from the obligation to prepare a remuneration report;
  • make amendments to the test for payment of dividends;
  • improve the efficiency of the Takeovers Panel, by allowing the Panel to perform Panel functions while overseas;
  • clarify the ability of directors to vary their financial year by up to 7 days, regardless of the length of previous years.

Although ASX50 companies with large numbers of retail shareholders have been concerned about the cost of EGMs and their potential for “mischief”, fewer than 30 Australian listed company meetings have been called this way over the past 25 years. Rights to call an EGM by shareholders with at least 5% of the voting rights remain unaltered. The moves  have been supported not only by The Australian Institute of Company Directors and the Governance Institute of Australia but also The Australian Shareholder’s Association (ASA).

In place of the EGM rights, there are alternative proposals which would allow 100 shareholders to circulate a resolution for the agenda of a scheduled AGM of a company. Although ASA supports the EGM change, it believes that the resolution procedures are too onerous and has instead called for a new 10-signature rule, provided each person is holding a marketable parcel of shares worth more than AU$500. Stephen Mayne of the ASA has hailed their proposals as “the best way to energise lifeless AGMs“. The Governance Institute has rejected ASA’s suggestions claiming that the comparison with the US shareholder regime is inappropriate in a market which has considerably greater ownership rights at the outset.

The draft Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014, as well as an explanatory document on the proposed reforms, is available on the Treasury website.

Comments on the proposal can be submitted up to May 16, 2014 by email or post.

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