Australia: Corporate Alert

The Corporations and Markets Advisory Committee (CAMAC) released its report on Corporate Duties Below Board Level in April 2006.

The Report, requested by the federal government following the HIH Royal Commission, recommends that the provisions of the Corporations Act outlining the duties of directors and other company officers be extended to ‘reflect fully the realities of modern corporate life’.

Accordingly, it is recommended that these obligations should also apply to nondirectors who take part, or are concerned, in the management of a corporation – potentially covering employees, independent contractors and consultants.

We will report on the federal government’s response to the recommendations in a later edition of Corporate Alert.

The Business Law Reform Bill has been referred by Parliament to Select Committee. The Bill aims to increase the clarity, efficiency and effectiveness of certain laws affecting commercial entities in New Zealand. Public submissions are due by 25 August 2006, with the Committee’s report due 19 October 2006.

This is the third bill aimed at making incremental improvements to New Zealand’s business laws. The Bill improves the law in a number of small ways by:

• Removing unnecessary compliance obligations.
• Improving consistency between different legislative requirements.
• Implementing high-level changes to a number of key Acts.

The changes to the Companies Act and the Financial Reporting Act will be particularly welcome. These changes streamline annual reporting to shareholders and introduce new classes of entity with lesser financial reporting requirements.

We will provide an update when the Committee’s report is published.

The Parliamentary Joint Committee on Corporations and Financial Services published its report on Corporate Responsibility: Managing Risk and creating value in June 2006.

The report provides valuable guidance in assessing the likely regulatory and policy measures that may be implemented by the Australian Government in response to the growing focus on ‘corporate social responsibility’ (CSR) within the business community and the public at large.

In particular, the Committee has concluded that the existing legislative framework of directors’ duties is satisfactory and that no amendments to the Corporations Act 2001 (Cth) (Act) are required. The Committee favoured what it terms the ‘enlightened self-interest’ interpretation of directors’ duties, namely that the existing legislative framework already permits directors to take into account the interests of non-shareholder stakeholders in corporate decision-making, to the extent that those interests are relevant to their company.

Prior to the parallel CAMAC inquiry releasing its final report into CSR and the Australian Government formally responding to both reports, directors should review the performance of their company and its board in relation to a number of CSR and sustainability-related issues. This includes the nature and scope of the company’s activities, the voluntary sustainability reporting (if any) that the company currently engages in and the CSR, sustainability and broader risk-management strategies that the company has in place or may wish to implement. Phillips Fox can assist directors and companies in refining their existing practices, or in taking the first steps towards formulating an appropriate CSR and sustainability strategy.

In recognition of the highly integrated nature of the Australian and New Zealand economies, on 7 August 2006 the Australian Competition and Consumer Commission (ACCC) and New Zealand Commerce Commission (NZCC) agreed to adopt a Cooperation Protocol for Merger Review.

The protocol seeks to:

• Reduce the compliance costs to business and the transaction costs to agencies applying competition law.
• Increase the effectiveness of competition laws in both countries.
• Improve consistency in handling of transactions which are the subject of dual review.

The protocol is designed to enhance cooperation and information sharing in merger review between the ACCC and NZCC. Examples of such cooperation include:

• Synchronising timing of review where possible.
• Excluding the same type of confidential information from each of the commissions’ public registers.
• Endeavouring to facilitate mutually compatible remedies.

The level of cooperation will be dependent on the particular features of the transaction.

Under the protocol the commissions will notify each other through recognised points of contact when either becomes aware of merger transactions which may involve trans-Tasman operations, or which may impact on a market affecting the other jurisdiction.

The protocol does not create any enforceable rights and neither commission is required to adhere to the protocol where doing so would be inconsistent with any relevant law, or with its own aims, functions and interests.

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.