INSIGHT

Nucleus – corporate law developments: COVID-19 relief for electronic meetings and document execution extended; first tranche of FIRB reform legislation released; ASIC calls for recognition of casual employee benefits in accounts; and other corporate law developments

By Vijay Cugati
Mergers & Acquisitions Technology

In brief 13 min read

Extension of COVID-19 relief for electronic meetings and document execution; first tranche of FIRB reform legislation released; ASIC calls for recognition of casual employee benefits in accounts; consumer data right goes live for Big 4 banks; draft news media bargaining code released; Panel considers proceedings during administrations in Virgin; and Queensland moves towards criminalisation of wage theft.

COVID-19 and the changing rules that apply to corporate Australia

Governments and regulators around Australia continue to respond quickly with emergency powers and temporary rules as the COVID-19 pandemic endures and evolves. The number of new announcements and policy changes makes it difficult to keep up with the regulatory landscape at times, so we are keeping track of these developments and what they mean for Australian businesses. Key recent developments that are of particular significance from a corporate law perspective include:

  • The Treasurer has announced that temporary regulatory relief provided under the Corporations Act to allow companies to hold meetings online, and provision for electronic execution of documents, will be extended for a further six months until 21 March 2021. Companies will be permitted to provide notice of AGMs to shareholders via email, achieve a quorum with shareholders attending online and hold annual general meetings online. Further, company officers will be able to sign documents electronically without having to sign the same physical document.
  • The ACCC continues to authorise cooperation and coordination between competitors in various industries amidst supply concerns posed by the COVID-19 crisis. Recently, private and public hospital operators and major oil refineries obtained ACCC authorisation and a draft determination suggests that the authorisation for supermarkets will continue until March 2021. The interim authorisation granted in March that allowed Rex to coordinate flight schedules with Qantas and Virgin Australia on 10 regional routes will extend until 30 June 2021, under another ACCC proposed authorisation.
  • The Victorian Government has enacted the Occupational Health and Safety (COVID-19 Incident Notification) Regulations 2020 (Vic), which requires employers to immediately notify Worksafe when they become aware that a worker has tested positive for coronavirus. The regulations extend the existing incident notification obligations under the Occupational Health and Safety Act 2004 (Vic). As is the case with other notifiable incidents under the OHS Act, employers will also need to provide WorkSafe with written notification of the diagnosis within 48 hours. Failing to comply with the notification obligations may attract fines of up to $39,652 for individuals or $198,264 for companies. The regulations are set to expire after 12 months.
  • As COVID-19 restrictions begin to ease in some states and territories (and increase in others), it is crucial that employers remain conscious of their obligations under WHS laws when planning return-to-work arrangements. Companies and their officers need to keep in mind their primary duty under relevant WHS laws to ensure, as far as reasonably practicable, the health and safety of their employees and all persons in the workplace, by eliminating risks to health and safety (or reducing those risks where elimination is not reasonably practicable). In the context of COVID-19, risk management will be crucial to ensuring a safe working environment as more people return to work. As part of the risk management exercise, employers should consider the particular risk of COVID-19 exposure in the workplace and the control measures that are required to address that risk. This risk may be more acute in certain industries (eg aged care) or for certain roles, such as customer-facing positions. Employers should also stay across public health orders and pay particular attention to advice from safety regulators, such as the National COVID-19 Safe Workplace Principles published by Safe Work Australia.

    The Safe Workplace Principles provide guidance to employers about how to manage employees returning to work in a way that is consistent with obligations under WHS laws. As with all guidance from safety regulators, if an employee contracts COVID-19 in the workplace, the relevant safety regulator will investigate whether an employer has complied with the Safe Workplace Principles (and other relevant guidance material). Companies and their officers in Victoria, Queensland, the ACT and NT need to be particularly conscious of managing COVID-19 risks as employees return to work, in light of industrial manslaughter laws in those jurisdictions, which expose companies and officers to criminal prosecution for certain breaches of WHS laws that result in a fatality.

What you need to know

FIRB: Treasury releases first tranche of exposure draft legislation on major reforms to Australia's foreign investment framework

The Treasurer has released the exposure draft of the Foreign Investment Reform (Protecting Australia’s National Security) Bill 2020 (Cth), along with the exposure draft of the first part of draft amendments to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth), for public consultation.

The exposure draft Bill and Regulation, which you can read about in our FIRB Insight: Release of exposure draft of amending legislation – national security test, provides for a new category of 'notifiable national security actions' where a person acquires a direct interest in a 'national security business'. The definition of 'national security business' will broadly relate to critical infrastructure, telecommunications, defence and data and personal information. The draft Bill also deals with the new 'call in' and 'last resort' powers which will enable the Treasurer to review and potentially impose conditions or unwind transactions occurring after 1 January 2021 where those transactions cause national security concerns, even in some circumstances where the transactions have previously been approved.

The second part of the exposure draft Regulation will be released in September and will include the remainder of the regulatory changes, including the time limit for the call-in power, streamlining measures (including investor exemption certificates) and other technical amendments. You can read more about the second tranche of changes in our Insight: Major proposed changes to FIRB regime from 1 January 2021.

Submissions on the first tranche of exposure drafts are due by 31 August 2020, with the Government targeting a 1 January 2021 commencement date for the new regime. Based on that timing, it is expected that the current interim measures, including the zero dollar thresholds, will remain in place for the rest of the year.

ASIC: Financial reporting guidance brings forward considerations for reporting casual worker entitlements; consultation on further use of product intervention power; review of 31 December 2019 financial reports and focus areas for 30 June 2020 accounts; 'wagyu and shiraz' litigation comes to an end

ASIC has published a guide responding to FAQs on COVID-19 implications for financial reporting and audits. Of particular note is ASIC's commentary on the implications of the Federal Court's decision in WorkPac Pty Ltd v Rossato, where the court held that a casual employee may, by virtue of their employment relationship, in fact be a permanent employee with the associated benefits of that classification, with the regulator suggesting that companies may need to include a provision or contingent liability in their accounts for benefits that could be owed to casual employees employed on a regular basis, even though the decision is subject to an application for special leave to appeal to the High Court. You can read more about the WorkPac v Rossato decision and its implications for employers in our Insight: Permanent casual – like smart casual, a very ambiguous category indeed.

ASIC has completed its review of financial reports for 90 listed and other public interest entities for the year ended 31 December 2019. ASIC's feedback highlighted that it considered that assumptions about cash flows in some reports were unreasonable. ASIC made a total of 40 enquiries arising from its review, with 19 of those enquiries relating to revenue recognition and impairment and other asset values. In light of the COVID-19 situation, ASIC noted that directors and auditors of companies with 30 June 2020 year-ends can expect scrutiny on asset values, provisions, solvency and going concern assessments, post-year-end events and disclosures in financial reports and operating and financial reviews as part of the regulator's next financial report reviews.

ASIC has released Consultation Paper 330 – Using the product intervention power: Continuing credit contracts on the its proposal to use its product intervention power for the second time. The power allows ASIC to intervene where there has been, will be or is likely to be, significant detriment in relation to financial and credit products. Following ASIC's banning of short-term credit products in September 2019, ASIC is now turning its focus to using the power in relation to continuing credit products, with the regulator considering that many retail consumers of continuing credit products are vulnerable clients experiencing financial difficulties.

Finally, ASIC will not seek special leave to appeal the full Federal Court's dismissal of its appeal in the 'wagyu and shiraz' responsible lending case to the High Court, leaving any future clarification of the responsible lending laws in the hands of the Government. ASIC will review Regulatory Guide 209 – Credit licensing: Responsible lending conduct to determine if the guidance needs to be updated in light of the Federal Court's decisions.

ASX: ASX releases consultation paper on proposed changes to BBSW methodology

The ASX has released its Consultation paper: BBSW methodology enhancement, outlining its proposed changes to the existing Bank Bill Swap Rate waterfall calculation methodology. The proposed changes will broaden the pool of transactions that will be captured in calculating the BBSW, with the goal of maximising the use of transaction data (compared to other financial benchmark data) to more accurately reflect market conditions. More specifically, the proposed changes will widen the range of eligible transactions by widening the maturity pool of transactions, while ensuring the quality of the rate by the introduction of a new weighted least squares regression (LSR) methodology into the waterfall. Submissions on the consultation paper are due by 27 August 2020, ahead of an anticipated implementation in November 2020.

ACCC: Consumer Data Right goes live; data proceedings against Google amidst allegations of misleading consumers; draft news media bargaining code released; and recent merger updates

On 1 July 2020, the Consumer Data Right (CDR) went live, meaning that customers of the 'Big 4' banks can now request their bank to share their data relating to deposit and transaction accounts, and credit and debit cards under the CDR regime. From 1 November 2020, the CDR will also apply to data relating to home loans, investment loans, personal loans and joint accounts. CDR enforcement will be a joint affair between the ACCC and the OAIC acting in their respective capacities as competition and consumer watchdog and privacy regulator. The joint CDR Compliance and Enforcement Policy published in May 2020 calls out the categories of misconduct that will attract enforcement consideration, including misconduct that is likely to result in consumer harm or undermine the integrity of the CDR regime.

Further on the data front, the ACCC has instituted Federal Court proceedings against Google, alleging that Google misled consumers to obtain their consent to expand the scope of personal information it could collect, combine and use. The ACCC alleges that Google misled consumers when it failed to properly inform consumers, and did not gain explicit informed consent from consumers, about Google's move in 2016 to start combining personal information in consumers' Google accounts with information about those individuals' activities on non-Google sites that used Google technology. The ACCC alleges that the consent Google did obtain was misleading because consumers could not have properly understood the changes Google was making, nor how their data would be used, and therefore consumers could not give their informed consent. ACCC Chair Rod Sims said that, if successful, the case will set a precedent about what Google and other platforms can and cannot do when they are seeking consent, and in particular, how consumers are informed about things and the information they are given when they are asked to agree to things on the internet. Mr Sims indicated that his notion of informed consent involves using 'short, clear statements… [which] … make it really clear that’s what you're agreeing to'.

The ACCC has released a draft news media bargaining code which the regulator says is aimed at addressing bargaining power imbalances between news media businesses and digital platforms. The draft legislation contemplates a framework in which news media businesses will be able to bargain individually or collectively with digital platforms over payment for the inclusion of news content on digital platforms' services, as well as through a binding 'final offer' arbitration process. The draft code also proposes setting minimum standards that govern non-payment-related issues that digital platforms must meet in their dealings with news media businesses, which cannot be negotiated away.

In merger news, the ACCC commenced two new merger reviews in the construction products and the hydraulics industries, including:

Additionally, the ACCC has completed the following merger reviews:

Takeovers Panel: Panel considers merits of conducting proceedings during administrations in Virgin

The Panel was drawn into the Virgin administration saga when certain unsecured creditors of the airline submitted an application to the Panel seeking a declaration of unacceptable circumstances, which was subsequently withdrawn.

The creditors had submitted an offer to recapitalise and provide interim funding to the group, before the administrators executed a Sale and Implementation Deed (SID) with another suitor. Although the creditors requested a copy of the SID, the administrators obtained court orders which had the effect of keeping the SID confidential. The creditors had also previously entered into a confidentiality agreement with Virgin which regulated access to confidential information.

The creditors sought a declaration of unacceptable circumstances on the basis that:

  • the administrators failed to meaningfully engage with the creditors and restricted their ability to complete due diligence; and
  • the creditors' confidentiality agreement and the SID had an anti-competitive effect which precluded an alternative arrangement being presented to Virgin's creditors.

The creditors unsuccessfully sought a variation of the court orders to allow disclosure of the SID to the creditors and the Panel, before seeking leave to withdraw their Panel application.

The Panel decided it was not against the public interest to permit the creditors to withdraw their application. In its reasons, the Panel noted that, while the Corporations Act does not prevent the Panel from conducting proceedings in relation to a company in administration:

  • proceedings are unlikely to be conducted where a company is in administration and no equity value remains in its shares; and
  • the Panel will not inappropriately obstruct action by an administrator to bring a company back to solvent operation.

The Panel was minded to accept the administrators' declaration that there was no likelihood that shareholders would receive any distribution under the SID. The Panel also considered the broader public interest in expediting Virgin's administration, given the negative effects of COVID-19 on the airline industry. In addition, the Panel noted that the creditors' allegation that the confidentiality agreement acted as a lock-up device to restrain creditors from meeting with key stakeholders may have warranted further investigation if Virgin was solvent, but queried whether the benefits of transaction certainty would become more important in the context of an insolvent administration, with the risk of imminent liquidation. The Panel was also mindful that the creditors also had other means to pursue their goal, through the court and at the second creditors' meeting.

Employment: Queensland takes steps towards criminalisation of wage theft

The Queensland Government has introduced legislation to Parliament which would criminalise wage theft. If enacted, the Criminal Code and Other Legislation (Wage Theft) Amendment Bill 2020 (Qld) (Wage Theft Bill) will amend the definition of 'stealing' in the Queensland Criminal Code to include the failure to pay an employee an amount payable under an Act (whether state or federal), industrial instrument or agreement, with the intent to deprive the person of that amount. Under the Wage Theft Bill, wage theft may be punishable by imprisonment for up to 10 years.

The Wage Theft Bill will also introduce a small claims procedure for employees who allege they have been underpaid amounts of up to $20,000. The small claims procedure is intended to provide employees with a timely, inexpensive and informal resolution mechanism to deal with wage theft allegations.

The Wage Theft Bill has been referred to committee and may be amended. We will report on progress of the Wage Theft Bill as it progresses through the Queensland Parliament.