Policy Update March 2012
- Date:15 Mar 2012
- Type:Policy Update
Our recent policy submissions span the not-for-profit (NFP) sector,
anti-phoenix legislation and
dividend payments.
What underpins the rationale for our policy team making submissions in relation to each of these issues is how they affect our members.
Australian Charities and Not-for-profits Commission
The NFP sector remains a key area of focus for Company Directors. From a policy perspective, we are keeping an eye on the governance arrangements and framework that is being created as the Government seeks to regulate the so-called “third sector”.
One of our most recent submissions was in relation to the discussion paper, Australian Charities and Not-for-profits Commission: Implementation Design.
While outlining concerns with the policy underpinning some of the consultation questions (such as threshold reporting levels and standardised reporting periods), we expressed support for most of the proposals put forward. For example, we consider the Standard Business Reporting (SBR) taxonomy, with some modification, is an appropriate basis for reporting financial items to the ACNC.
We also suggested that ACNC can play a useful role by serving as a “window” or “gateway” to education and guidance material on NFP governance made available by peak bodies and others.
Potential impediment to starting a business again
Our interest in making a submission in relation to the Government’s drafting of legislation regulating fraudulent phoenix company activity was to ensure that the legislation does not inadvertently prevent directors and owners of legitimate businesses from starting again, should they fail on the first occasion. While we strongly oppose fraudulent phoenix activity, we are eager to ensure that proposed legislation does not provide a disincentive for entrepreneurs who may wish to start their businesses again, should they fail initially.
We argued for an appropriate and well formulated definition of “fraudulent phoenix activity” to be included in the legislation and that this definition incorporate a dishonest intention on the part of the directors to defraud or deceive creditors.
Dividend Payments
Our submission on dividends payments argues for an appropriate test to be included in the legislation that regulates when and how companies are able to determine whether they are solvent enough to pay a dividend to shareholders. Our objective is always to ensure the “lightest touch” so that directors are not burdened by prescriptive or pernicious laws that unnecessarily restrict or impede corporate performance.
New White Paper: Mind The Expectation Gap
As Steven Cole FAICD noted in his white paper, Mind the Expectation Gap, which we launched on 23 February 2012, advocating so that directors are able to operate in an environment free from “overly defensive corporate practices focused on compliance and liability protection, rather than productive and prudential entrepreneurship” is essential for ensuring that valuable boardroom time being is spent on performance issues rather than conformance.
The consequences of over-regulation and excessive liability for our national wellbeing, according to Cole include “reduced productivity, investment inflows, international competitiveness and social and community dividends.”