All articles in Volume 13 Issue 4

Charities fall down

5 Mar BRR image

More than 20 per cent of Australian charities have failed to meet their annual reporting obligations to national charity regulator, the Australian Charities and Not-for-profits Commission (ACNC), with thousands missing the 31 January deadline.

The ACNC has said 7,000 charities failed to deliver their 2014 annual information statements (AIS), with 2,000 of these charities located in New South Wales.

Charities that use a standard reporting period (1 July – 30 June) had until 31 January 2015 to submit their 2014 AIS. Submitting a 2014 AIS is a legislative requirement for charities registered with ACNC and there are penalties for non-lodgement, including the revocation of charity status.

ACNC Commissioner, Susan Pascoe AM FAICD, has warned that charities with overdue 2014 statements needed to take urgent action to avoid penalties and added that the regulator will soon begin issuing warning letters to those who failed their obligations.

The 2014 AIS updates are also essential as the information is entered into the national charity register, which allows members of the public and donors to find information about charities. This information is particularly important as it increases transparency in the sector and helps to promote public trust and confidence.

Charities that do not use a standard reporting period of 1 July to 30 June have six months from the end of their reporting period to submit their 2014 AIS. ACNC has said charities are advised to check their substituted accounting period is approved by viewing their charity’s entry on the charity register or by logging into the charity portal.

Further information can be found here.

Rules for activists

The Australian Securities and Investments Commission (ASIC) is reviewing its regulatory guidance for investors who want to take collective action to improve the corporate governance of listed entities.

Consultation paper 228 Collective action by investors: Update to RG 128 (CP 228) proposes updates to the regulatory guide 128 Collective action by institutional shareholders (RG 128).

Collective action by investors can give rise to compliance issues under the takeover and substantial holding provisions of the law. These provisions are concerned with the aggregated voting power of groups of investors who are either related to or associated with some aspect of the entity’s affairs.

For instance, an agreement to vote together on a matter could result in an investor contravening the 20 per cent takeover threshold, which prohibits shareholding increases above 20 per cent of a code company’s voting rights, except for increases that are made under the takeovers code’s rules.

As part of the review of the guidelines, ASIC has proposed a number of changes in CP 228. They include:

Updated guidance on how the takeovers and substantial holding notice provisions apply to collective action by investors, including illustrative examples of conduct which is unlikely or likely to trigger these provisions.

  • An outline of ASIC’s proposal to approach enforcement in relation to these provisions by focusing on conduct that is control seeking rather than simply promoting good corporate governance.
  • An overview of other legal and regulatory issues that can arise in relation to investor engagement.

ASIC also proposes to discontinue the existing class order relief available to facilitate agreements between institutional investors about voting as it does not reflect the way in which institutional investors tend to engage with entities and has not been used for many years.

Comments on CP 228 are due by 20 April 2015.

Click here for further details.

Insolvency fix

The Australian Institute of Company Directors (AICD) has lodged a submission with the Productivity Commission in response to its discussion paper Business set-up, transfer and closure.

The submission has most relevance for members of small-medium enterprises and not-for-profits incorporated under the Corporations Act as generally, they are most likely to find themselves in insolvent situations.

It is also relevant to listed company directors particularly those involved with companies at the lower end of the Australian Securities Exchange.

In its submission, AICD re-iterated its view that the primary objective of Australia's insolvency regime should be corporate recovery. It added that the insolvency regime should encourage entrepreneurialism and operate to save businesses that can be saved, in turn, encouraging innovation, economic growth and the preservation of employment.

AICD also highlighted its concerns that aspects of the current regime sometimes prevent the best stakeholder outcomes from being achieved. This included the need to address the director liability environment surrounding insolvency and that the potential for our proposed honest and reasonable director defence to overcome this issue.

The submission also encouraged the Productivity Commission to consider whether some restrictions on the rights of substantial secured creditors to immediately enforce their security during the voluntary administration process may assist to save businesses.

Click here to read the submission.

Five global risks 

In our increasingly globalised world, boards should consider key global risks and trends in developing business strategy. In order to prepare for and build resilience against global risks, it is important that boards take a long-term view and understand the likelihood of particular risks and their potential impact.

The World Economic Forum recently released the 10th edition of the global risks report. The report is based on a survey of nearly 900 leading decision-makers from business, academia, and the public sector. It sets out a view on 28 global risks (economic, environmental, societal, geopolitical and technological) as well as the drivers of those risks in the form of 13 trends.

The report highlights five global risks that stand out as both highly likely and highly potentially impactful: interstate conflict; failure of climate-change adaptation; water crises; unemployment and underemployment; and cyber-attacks.

The 2015 report shows a shift from past years away from economic risks to geopolitical and environmental risks. In terms of economic risks, the report states "there is a feeling that significant progress has been made in reducing the likelihood of another financial crisis", but notes that this "may reflect a false sense of control".

Technological risks (notably, cyber-attacks) are also increasing in significance. Further, the report examines the potential risks (including hard-to-foresee risks) and rewards of emerging technologies – with disciplines such as synthetic biology and artificial intelligence creating new fundamental capabilities.

This story first appeared in the February update of the Australian Institute of Company Director's Centre for Governance Excellence and Innovation. For more highlights of the February update go to

ACCC's 2015 priorities

Cartel conduct in government procurement, truth in advertising, competition and consumer issues in the health sector and industry codes are some of the Australian Competition and Consumer Commission's (ACCC) new compliance and enforcement priorities for 2015.

Launching the 2015 edition of the ACCC's compliance and enforcement policy, chairman Rod Sims said ACCC will be seeking to emphasise that the size of penalties in particular cases must be sufficient to provide appropriate deterrence.

This follows commentary that the recent $11 million penalty against Flight Centre was "immaterial" and statements by Justice Gordon that the penalties available against Coles for unconscionable conduct were "arguably inadequate".

Sims said competition and consumer issues in highly concentrated sectors will remain a priority and that the Coles unconscionable conduct outcome sets a benchmark which can be applied to other sectors.

He also added that both competition and consumer issues in the medical and health sector need increased attention.

As part of the new compliance priorities, the ACCC will concentrate on emerging consumer issues in the online marketplace to ensure the rights and obligations that exist in the “bricks and mortar” world are not ignored online.

In the area of improving product safety, Sims confirmed ACCC will seek to minimise the supply of unsafe goods by focusing on good practice in the manufacture, importing and quality assurance of consumer products.

As well as bedding down changes to the franchising code of conduct, the introduction of a code of conduct to address unfair practices in the grocery sector will be a major focus in 2015.

Further details can be found here.

New era of marketing

At the very best, the marketing functions of business can achieve outstanding results. While at the worst they are mired in jargon and without any ability to measure the results.

Therefore many directors would be keen to know that McKinsey has published an article in which they assert that marketers are “boosting their precision, broadening their scope, moving more quickly, and telling better stories”.

The article builds a case that could be summarised as marketing moving from the four P’s (product, price, place and promotion) to the five S’s – science, substance, story, speed and simplicity.

Science is helping marketers better target and measure returns. The interaction with customers can help refine products and offerings. But marketers and hence, directors, need to understand the technology of this science in order not to be left behind.

With much increased data about customer interactions the substance of what the business does can actually be impacted. Businesses can meet customer expectations by developing products customers want at the price they will pay. Directors can now have customer data that supports strategic decisions.

According to the article, the speed of business has increased many-fold and agility is paramount throughout an organisation. Directors need to ensure that this agility is enhanced by board processes rather than stifled by them.

Simplicity enhances speed. Layered, bureaucratic organisations are not fast. And rarely are they innovative or ultimately successful. Simplification of processes should be a director’s aim.

And lastly – story. The article says a clear brand story of a business has always been important and it remains so. However, the channels to communicate the story have changed and will most certainly continue to change. Customers now contribute to a business’ story – whether good or bad.

The article says the five S’s bring the customer closer to the business. Directors should understand this democratisation of business by customers will continue to gather pace and bring them ever closer to the boardroom.

Impartiality is best

Private equity-backed company boards need independent directors, as without them, the legal risks can be high, according to an article in Private Company Director magazine.

The article argues that many companies controlled by a single stockholder or affiliated stockholder have significant minority investors. This is particularly common in private equity-backed companies where the lead private equity fund may have partnered with another fund that takes a secondary position, and where the management team typically also has an equity stake. The article says that while it is not remarkable that owners and their representatives wear multiple hats with private equity-backed companies as well as in other businesses, without careful advance planning, multiple roles can create complex challenges for the controlling owner and its representatives on the board of directors.

This can sometimes lead to directors biting off more than they can chew if troubled times arrive. While there is no perfect solution to handling conflicts, particularly when facing troubles such as a liquidity crisis or other challenges, many difficulties can be avoided if the board has included at least one director who reasonably would be considered to be independent from the controlling stockholders.

The article adds that engaging a truly independent director, preferably two, can be a fairly inexpensive insurance policy against future challenges. It suggests the creation of a special committee by the board to manage such matters and four key points to consider when establishing this committee. These include:

  1. Establishing a clear mandate.
  2. Guarding against undue influence of interested parties.
  3. Retaining knowledgeable, independent advisers.
  4. Maintaining accurate record-keeping.

The full article can be found here.

New Toro chair

Fiona Harris FAICD has been announced as the new chairman of uranium explorer Toro Energy.

Harris replaces Erica Smyth FAICD who has decided to retire after nine years as a non-executive director and chairwoman.

Harris is on the board of Infigen Energy, property investor BWP Trust, Perron Group and Oil Search and has also been a national director and WA state president of the Australian Institute of Company Directors.

Toro also announced that non-executive director and former managing director Greg Hall is set to retire on 16 March.

The company also flagged the resignation of one of Mega Uranium's nominee directors from the Toro board in the coming months, reflecting the new shareholder structure following its recent financing transaction.

Toro said the board changes reflected the prevailing market circumstances and was in line with its board renewal process. The company is focused on the development of its Wiluna uranium project, which it hopes will be WA's first producing uranium mine.


Southern Cross Media Group has appointed Peter Bush as its non-executive independent director and chairman, with effect from 25 February 2015.

Bush replaces Max Moore-Wilton who has served as chairman since 2007.

Bush is currently chairman of Pacific Brands, chairman of resorts and hotels operator Mantra Group and has also served on the boards of Nine Entertainment Holdings, Insurance Australia Group, Miranda Wines, McDonalds Australia and beverages company Lion Nathan.

His appointment continues the group’s attempts to renew and strengthen the independence of the Southern Cross board which commenced in mid-2014 with the appointment of three new independent directors – Kathy Gramp FAICD, Rob Murray and Glen Boreham AM.

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