| by Tom Bloomfield and Rebecca Lillington
The ASX Corporate Governance Council (“Council”) published the 4th Edition of the Corporate Governance Principles and Recommendations (“ASX Principles”) on 27 February 2019. All ASX listed entities are recommended to apply the principles and recommendations contained within as they are, in the Council’s view, likely to achieve good governance outcomes and meet the reasonable expectations of most investors in most situations. The previous edition of the ASX Principles was published in 2014, the new edition seeks to address emerging issues around culture, values and trust. We have previously written Articles regarding the anticipated changes to the ASX Principles, before they came into effect, which can be found here:
The ASX Principles will take effect for a listed entity’s first full financial year commencing on or after 1 January 2020. The below table demonstrates when the ASX Principles will first become applicable for different financial year ends.
|Year End||Effective Date|
|31 March 2020||1 April 2020|
|30 June 2020||1 July 2020|
|30 September 2020||1 October 2020|
|31 December 2020||1 January 2021|
The table below provides a brief summary of the substantive changes to the ASX Principles.
Principle 1: Lay solid foundations for management and oversight
Additional Board Requirements
Recommendation 1.1: Listed entities need to disclose a board charter. A Board should be responsible under its charter for:
Recommendation 1.2: An entity should undertake background checks on senior executives (not just board members) before engaging them.
Recommendation 1.6/1.7: A Board should have in place an annual review processes for the board and management which assesses whether performance has been impacted by a directors’ other commitments.
Recommendation 1.5: introduces the requirement:
Principle 2: Structure the Board to be effective and add value
Recommendation 2.3: relates to the test for director independence. It now includes a focus on “personal relationships” as opposed to “family relationships”. It also scrutinises directors with performance-based remuneration. Finally, it provides further clarity in relation to assessing director independence. If any of a specific set of factors are present, the director should be considered not to be independent, unless it is clear that the issue is not material and won’t affect their judgement.
Recommendation 2.6: Listed entities must have programs for periodically reviewing the need for existing directors to undertake professional development programs.
Principle 3: Instil a culture of acting lawfully, ethically and responsibly
Recommendation 3.1: The board and management of listed entities must consider not just shareholders but their employees, customers, suppliers, creditors, regulators, consumers and the local communities in which they operate.
Recommendation 3.1: Listed entities must articulate and disclose their values setting out aspirational guiding principles.
Code of Conduct
Recommendation 3.2: Listed entities must disclose a code of conduct and have systems to inform the board of material breaches of codes of conduct.
Whistleblower policy and an anti-bribery and corruption policy
Recommendations 3.3/3.4: Listed entities must create and disclose a whistleblower policy and an anti-bribery and corruption policy. Each must have reporting requirements for material incidents/breaches to the board or a subcommittee of the board.
Principle 4: Safeguard the integrity of corporate reports
Integrity of Corporate Reports
Recommendation 4.3: Listed entities must have and disclose a process to verify the integrity of their annual directors’ report and other unaudited reports. Investors should understand how the listed entity has satisfied itself that these reports are accurate, balanced and understandable, and appropriate information to make informed investment decisions.
Principle 5: Make timely and balanced disclosure
Recommendation 5.2: Boards must receive copies of all Listing Rule 3.1 announcements promptly after publication.
Securityholder receipt of timely information
Recommendation 5.3: New investor/analyst presentations should be published on the ASX Markets Announcements Platform ahead of the actual presentation.
Principle 6: Respect the rights of security holders
Recommendation 6.3: Listed entities must disclose how they facilitate and encourage participation at meetings of securityholders.
Recommendation 6.4: Resolutions at meetings of securityholders which are considered substantive should be decided by poll, rather than a show of hands. Both the ASX and ASIC have been concerned about this issue for some time.
Principle 7: Recognise and manage risk
Recommendation 7.2: Listed entities must evaluate whether they are operating with due regard to the risk appetite set by the board.
Focusing board attention on environmental and social risks
Recommendation 7.2: Requirements to ensure the risk framework adequately addresses emerging risks such as conduct, and digital and data risks have been added.
Recommendation 7.4: Refinements of the disclosure obligations in relation to sustainability have also been made so that they focus on “environmental and social risks”, instead of “economic, environmental and social sustainability” risks.
Principle 8: Remunerate fairly and responsibly
No noteworthy changes.
Principle 9: Additional recommendations that apply only in certain cases
Language abilities of directors
Recommendation 9.1: Listed entities should disclose the processes they use to ensure their directors who do not speak the language in which board meetings are held can understand and contribute to board meetings and discharge their obligations in relation to those meetings and documents.
Location of board meetings
Recommendation 9.2: Listed entities established outside Australia should ensure that meetings of securityholders are held at a reasonable place and time.
Attendance of auditor at foreign located AGMs
Recommendation 9.3: A listed entity established outside Australia, and an externally managed listed entity that has an AGM, should ensure that any external auditor attends its AGM and is available to answer questions from securityholders relevant to the audit.
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