INSIGHT

Nucleus – corporate law developments: virtual meetings and e-signing lead a raft of changes coming in 2022

By Vijay Cugati
Mergers & Acquisitions Technology

The latest legal and regulatory updates 12 min read

After an extremely busy end to the year, we are pleased to present our snapshot of corporate law developments to the end of 2021. We wish you all the very best for the Christmas and New Year break, and look forward to bringing you further developments through Nucleus in 2022.

What you need to know

ASIC: More temporary relief for virtual AGMs; Guidance for new JobKeeper payments disclosures; Call to review whistleblower policies; Guidance on hawking reforms

New legislation has come into force which amends the Corporations Act to allow companies and registered schemes to hold meetings of members using virtual meeting technology (commonly referred to as a 'virtual meeting') up to 31 March 2022. This should provide some comfort for the upcoming AGM season, but companies that want to retain the ability to hold virtual meetings beyond this date will need to enshrine this in their constitution – which means a special resolution to amend the constitution will need to be on the agenda. The changes also included amendments to allow the electronic execution of company documents. Parliament continues to consult on the form of the permanent changes for both virtual meetings and electronic execution.

ASIC has created a JobKeeper notice to help listed entities comply with their new obligation to disclose information about JobKeeper payments to the market and has published an accompanying information sheet (INFO 263) that provides answers to frequently asked questions. The new JobKeeper obligations commenced on 14 September 2021 and are imposed by section 323DB of the Corporations Act. We discuss them further in our ASX update below.

ASIC has written to CEOs of public companies, large proprietary companies and trustees of registrable superannuation entities urging them to review their whistleblower policies to ensure they comply with the law. ASIC's letter followed its review of a select sample of whistleblower policies and expressed concern that the majority of those policies did not fully address the relevant requirements. ASIC has indicated it will continue to monitor compliance with the whistleblower policy requirements and the handling of whistleblower disclosures and that it intends to conduct a further review in the future.

ASIC has published updated regulatory guidance (RG 38) on the new prohibition of hawking financial products introduced as part of the reforms to the to the anti-hawking regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth), which commenced on 5 October 2021. Under the prohibition, a person must not offer a financial product to a retail client in the course of or because of unsolicited, real-time contact. A consumer must consent to being contacted, and that consent must be positive, voluntary and clear. RG 38 provides guidance to industry on how they can comply with the regime and how the reforms affect commercial practices.

ASX: Response to submissions on consultation paper on oil and gas reporting requirements; Revisions to ASX Guidance Notes; CHESS replacement public consultation; Review of Issuer Administration Services pricing model

The ASX has released its response to the submissions it received on its consultation paper: Proposed changes to the oil and gas reporting requirements in the ASX Listing Rules. Subject to receipt of the necessary regulatory approvals, the final rule changes to Chapter 5 of the ASX Listing Rules will come into effect on 1 July 2022. These changes primarily relate to the provision of forecasts, estimates and prospective resources.

The ASX has updated its Guidance Note 17 (Waivers and In-Principle Advice) and Guidance Note 23 (Quarterly Reporting). The updates provide details of a new standard waiver from certain annual reporting obligations available to US-incorporated entities admitted to the ASX official list. Guidance Note 17 has expanded guidance about the types of in-principle advice applicants for listing can seek from the ASX. The marked-up versions of the existing Guidance Notes are available at: GN 17 and GN 23.

The ASX has released a consultation paper on the operating rule amendments required for CHESS Replacement. The tranche three rule amendments focus on netting, settlement, reporting and miscellaneous amendments for 'Day 1' implementation of the new system. The ASX is seeking feedback in written submissions prior to Tuesday, 14 December 2021 and will be engaging with issuers on a simpler pricing model for Issuer Administration Services in early 2022.

FIRB: Changes to critical infrastructure legislation

Amendments to the Security of Critical Infrastructure Act 2018 (Cth) came into effect on 3 December 2021, resulting in a significant expansion of the definition of 'critical infrastructure asset'. This will result in many more transactions being subject to a FIRB approval requirement because the Foreign Acquisitions and Takeovers Act 1975 (Cth) includes a requirement for foreign persons to obtain FIRB approval to acquire a 10%+ interest in any 'national security business' - which is defined to include 'responsible entities' and 'direct interest holders' of critical infrastructure assets within the meaning of the Security of Critical Infrastructure Act 2018 (Cth).

ACCC: ACCC kicks off debate in relation to merger regime and digital platform regulation reforms

In August 2021, ACCC Chair Rod Sims outlined the ACCC's proposals to significantly overhaul Australia's merger control regime. The key elements of the ACCC's proposals would operate to:

  • replace the current voluntary 'informal' merger review process with a mandatory formal clearance process;
  • make it easier for the ACCC to oppose mergers by:
    • placing the onus on merger parties to 'satisfy' the ACCC that the proposed acquisition is not likely to have the effect of substantially lessening competition;
    • lowering the standard of proof for finding that a merger is likely to substantially lessen competition from a 'real chance' to a 'possibility that is not remote'; and
    • deeming mergers that entrench, materially increase or materially extend a party's substantial market power to be unlawful;
  • limit the ability of merger parties to challenge the ACCC's decision before the judiciary; and
  • subject specified digital platforms to a regime comprising a tailored merger test with separate thresholds.

This is just the start of a critical debate and we encourage all those with an interest in doing business in Australia to participate. See our Insight: Is Australia's merger control regime really broken and is such significant change required?

On 28 September, the ACCC published its final report on the advertising technology (ad tech) sector (Report). The Report concludes that Google is dominant in key parts of the ad tech supply chain and that it has used its position to preference its own services and shield itself from competition. These concerns are similar to those raised by the ACCC in relation to other digital platform markets such as online search, social media and app marketplaces.

The Report recommends that regulations be considered to manage conflicts of interest, prevent self-preferencing and ensure rival ad tech providers can compete on their merits. The ACCC will be looking at whether a sector-specific regulatory scheme is needed to address its concerns.

In enforcement news:

  • The CDPP has withdrawn proceedings against ANZ and Rick Moscati regarding its allegation that an arrangement or understanding was made with joint lead managers in relation to the supply of ANZ shares.
  • The ACCC has instituted proceedings against First Class Slate Roofing and RAD Roofing Specialists alleging cartel conduct. The alleged conduct relates to the sole directors colluding to rig bids for tenders for slate roofing services at two construction projects in Sydney.
  • The ACCC has appealed the Federal Court's decision to dismiss its proceedings against NSW Ports Operations and its subsidiaries Port Botany and Port Kembla. The ACCC is appealing the court's finding that various Port Commitment Deeds, entered into as part of the privatisation of Port Botany and Port Kembla, did not have the purpose or effect of substantially lessening competition.

In merger news:

The ACCC successfully sought an interlocutory injunction in the Federal Court to restrain Virtus Health from completing its acquisition of Adora Fertility until proceedings brought by the ACCC are finalised. The parties had intended to complete the transaction even though the ACCC's review had not yet been completed.

Takeovers Panel: AusNet to engage with APA after declaration of unacceptable circumstances from Takeovers Panel

The Panel has made a declaration of unacceptable circumstances in response to an application by Australian Pipeline Limited as responsible entity of the Australian Pipeline Trust and APT Investment Trust (APA) in relation to the affairs of AusNet Services Limited (AusNet).

On 13 September 2021, AusNet received a proposal from the infrastructure affiliate of Brookfield Asset Management (Brookfield) to acquire all of AusNet shares by way of a scheme of arrangement for $2.50 cash per share. The parties entered into a confidentiality deed which provided Brookfield with a minimum of eight weeks of exclusivity and contained a 'no-talk' restriction that is not subject to a 'fiduciary out' which would relieve AusNet directors of this restriction if their duties require them to do so.

On 21 September 2021, APA announced an offer for $2.60 cash per share. However, AusNet responded by noting it will consider the proposal following the end of the exclusivity period with Brookfield.

APA successfully sought a declaration of unacceptable circumstances from the Panel where it was determined that the no-talk restriction with Brookfield will be of no effect unless a 'fiduciary out' is included. In reaching this conclusion, the Panel considered that the non-talk restrictions prevented AusNet from responding to a competing proposal and the long exclusivity period.

This decision echoes the Panel's requirement for greater safeguards around no-talk restrictions. In particular, the decision re-emphasises the position in Takeovers Panel Guidance Note 7 that, in the absence of a 'fiduciary out', a no-talk restriction is likely to give rise to unacceptable circumstances.

Employment: New industrial relations legislation proposed for WA; changes to Victorian OHS laws; finalisation of review of casual award terms

The Western Australian Government recently introduced the Industrial Relations Legislation Amendment Bill 2021 (WA) (IRLA Bill) into parliament. The IRLA Bill proposes to introduce a raft of amendments to industrial relations legislation in Western Australia to provide additional protections for vulnerable workers, modernise Western Australia's industrial relations laws and address wage theft.

We have set out below some of the key amendments proposed by the IRLA Bill.

  • The IRLA Bill seeks to introduce enhanced compliance and enforcement measures for breaches of industrial relations laws. These measures include enhancing the powers of inspectors, introducing accessorial liability for persons involved in contraventions of workplace laws and significantly increasing penalties for contraventions of workplace laws to bring these into alignment with penalties available under the FW Act.
  • The IRLA Bill includes a number of measures aimed at protecting vulnerable workers. For example, it includes prohibitions on sham contracting and 'cash back' arrangements, advertising employment at a rate of pay less than the applicable minimum wage and taking 'damaging action' (such as dismissal) against an employee because the employee made, or proposed to make, an employment-related inquiry or complaint.
  • To resolve uncertainty about the industrial relations system applying to Western Australian local governments, the IRLA Bill includes provisions that will enable certain employers to be declared not to be national system employers within the meaning of the FW Act.
  • The IRLA Bill also expands employment record-keeping requirements, including by requiring employers to issue pay slips that contain prescribed information, and establishes a stop-bullying and sexual harassment jurisdiction, as well as an equal remuneration jurisdiction, for the Western Australia Industrial Relations Commission.

The IRLA Bill is currently before the Legislative Council.

Changes to health and safety laws in Victoria

Victoria has recently introduced amendments to the Occupational Health and Safety Act 2004 (Vic) (OHS Act) that extend certain provisions to labour hire workers, provide new powers to health and safety representatives and prohibit certain types of insurance and indemnity arrangements.

Under these changes to the OHS Act:

  • labour hire workers will now be included in the definition of 'employee', meaning employers that host labour hire workers will owe the same health and safety duties to these workers as are owed to their direct employees. Labour hire providers and host employers will also have a new duty requiring them to consult, cooperate and coordinate with each other regarding health and safety matters;
  • contractual terms that purport to insure or indemnify a person against their liability to pay penalties for offences under the OHS Act and other safety legislation will be void. Further, it will be an offence to provide, enter into or hold cover of this kind or receive such a benefit under contract; and
  • health and safety representatives and union representatives will have additional powers to take photos, measurements, sketches and recordings when they are exercising their functions under the OHS Act.
Review of casual award terms finalised

On 27 March 2021, amendments were made to the FW Act to introduce a definition of 'casual employee' and casual conversion arrangements. The Fair Work Commission (FWC) was required to review and vary modern awards, where necessary, to remove any inconsistencies between the provisions of the awards relating to casual employees and the new provisions of the FW Act.

In August 2021, the FWC completed a review of six priority awards and replaced the existing casual conversion provisions of those awards with a new clause referring to the casual conversion entitlements available under the FW Act.

On 27 September 2021, the FWC finalised its review of the remaining modern awards and determined that the provisions of 151 modern awards relating to casual employees would also be amended in line with the new provisions of the FW Act.

News & other developments

Electronic execution updates

The Senate has run out of time in the 2021 sitting calendar to consider amendments that would make the temporary Corporations Act regime for electronic execution of documents (and the holding of hybrid and virtual company meetings) permanent. The issue will be pushed to the new year, but with no guarantee that appropriate legislation will be passed by the critical date of 31 March 2022, especially with the prospect of an election. In more positive news, Queensland has passed legislation to permit electronic execution of deeds, without witnessing, by individuals, corporations, partnerships, unincorporated associations and the State of Queensland. There have also been positive developments in New South Wales, with changes allowing corporations to sign electronic deeds, and the 'remote witnessing' rules for execution of documents made permanent. You can read more about the current landscape in our Insight: Signing documents in a pandemic.