Litigation & Dispute Resolution

Increase text sizeDecrease text sizeDefault text size

Client Update: New US disclosure law for resources companies

26 July 2010

In brief: The Dodd-Frank Wall Street Reform and Consumer Protection Act, which makes many changes to US corporations law, was signed into law by US President Barack Obama on 21 July 2010. Partner Annette Hughes and Lawyer Swee Leng Harris look at the operation and effect of section 1504 of the Act and what the new disclosure requirements imposed by that section mean for resources companies.


In our April 2010 Focus: Extractives – further international reporting demands, we reported that the US Congress was considering legislation that would require resource extractive companies registered with the US Securities and Exchange Commission (the SEC) to publicly disclose information relating to payments made to foreign governments. That legislation was passed in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act), section 1504 of which requires amendments to s13 of the Securities Exchange Act 1934 (15 USC 78M) to impose the extractives reporting requirements. On 21 July 2010, US President Obama signed the Act into law.

How does it affect you?

Section 1504 of the Act will apply to your company as a 'resource extraction issuer' if your company is registered with the SEC and engages in the development of oil, natural gas or minerals.

Section 1504 requires the SEC to issue rules that require resource extraction issuers to disclose in their annual report information about the type and amount of payments to foreign governments or the US Government for the purpose of the commercial development of oil, natural gas or minerals. These disclosures will be provided to the public by the SEC.

Resource extraction issuers will be required to include in their annual reports information about any payment:

  • made by the resource extraction issuer, a subsidiary of the resource extraction issuer, or an entity under the control of the resource extraction issuer;
  • to a foreign government or the US Government; and
  • for the purposes of the commercial development of oil, natural gas or minerals (including acquisition of a licence, exploration, extraction, processing, export and other significant actions as determined by the SEC).

Such information will include the type and total amount of such payments made:

  • for each project of the resource extraction issuer relating to the commercial development of oil, natural gas or minerals; and
  • to each government.

The term 'payment' includes taxes, royalties, fees (including licence fees), production entitlements, bonuses, and other material benefits, which the SEC, consistent with the guidelines of the Extractive Industries Transparency Initiative (EITI)1 (to the extent practicable), determines are part of the commonly recognised revenue stream for the commercial development of oil, natural gas, or minerals. Both the US and Australia are supporters of EITI, a status that means they support EITI initiatives (as opposed to being 'compliant' countries, a status requiring an independent assessment of whether key indicators have been met).

The cost of compliance should be relatively low, as the required information is generally readily available if not already compiled by affected companies.

The SEC will be required, to the extent practicable, to make available online a compilation of the information required to be disclosed under s1504.

What's next?

Section 1504 of the Act requires that the SEC issue rules requiring disclosure as outlined above within 270 days of the Act's enactment. Under s1504(F), the SEC rules will come into effect in the next financial year following the year after the rules are issued. Therefore, resource extraction issuers filing with the SEC will be required to make the disclosures outlined above in their annual report to the SEC for the 2011-12 financial year.

  1. As we previously reported, the Extractive Industries Transparency Initiative 'is a coalition of governments, companies, civil society groups, investors and international organisations', that is directed at creating a global standard for revenue transparency in oil, gas and mining. See: Extractive Industries Transparency Initiative, The Initiative <> at 19 July 2010.

For further information, please contact:

Share or Save for later

What are these?


To save this publication on your smartphone or
tablet for off-line reading (eg on a plane flight),
we recommend Pocket.



You can leave a comment on this publication below. Please note, we are not able to provide specific legal advice in this forum. If you would like advice relating to this topic, contact one of the authors directly. Please do not include links to websites or your comment may not be published.

Comment Box is loading comments...