The Corporate Governance Review: Australia

Overview of governance regime

In Australia, listed companies are subject to a corporate governance regime comprising various legislative instruments and regulatory guidelines including the Corporations Act 2001 (Cth) (Corporations Act), the Listing Rules of the Australian Securities Exchange (ASX), the Market Integrity Rules (Securities Markets) 2017 (Market Integrity Rules) of the Australian Securities and Investments Commission (ASIC), the ASX Corporate Governance Principles and Recommendations (CGPR) (4th Edition), the accounting standards of the Australian Accounting Standards Board (AASB) and ASIC's regulatory guides.

The Corporations Act regulates, among other things, the corporate governance duties and standards of behaviour for both private and public, listed and non-listed companies. It also applies to both local companies and foreign companies that are registered in Australia. As the principal piece of legislation in this area, the Corporations Act provides a roadmap for company officers and directors. It features a comprehensive regime of mandatory provisions that attract penalties for contravention and optional replaceable rules that can be excluded, modified or replaced by an alternative provision in a company's constitution.

The ASX, Australia's primary securities exchange and one of the world's top 10 listed exchange groups by value,2 has many overarching objectives, including:

  1. supervising compliance by listed entities with the Listing Rules and enforcing any contraventions of these rules;
  2. highlighting the importance of sound corporate governance values to ASX-listed entities in Australia; and
  3. educating retail investors, who lack a sophisticated understanding of the companies they are considering for investment opportunities.

The Listing Rules serve many purposes and govern terms around admission to the official list, disclosure and general behaviour. Contraventions of the Listing Rules can be enforced against listed entities pursuant to various provisions of the Corporations Act.

ASIC is empowered by Pt 7.2A of the Corporations Act to create the Market Integrity Rules, which govern domestic licensed financial markets and participants in those markets.

Established in August 2002, the ASX Corporate Governance Council (Council) operates as a hub for various stakeholders to share insights on topical corporate governance issues. The Council was responsible for developing the CGPR, the first edition of which was published in 2003. The Council has just recently released the fourth edition of the CGPR, which will apply to ASX-listed entities for financial years commencing from 1 January 2020 onwards. This revision was prompted by growing concerns over trust, values and culture in the corporate sphere.

Listed entities must take an 'if not, why not' approach to the CGPR. This simply means that, although the board of a listed entity is entitled to not adopt certain recommendations that it considers are inappropriate in the circumstances, it must explain its reasons for forming this view.3

Although the AASB operates under the Australian Securities and Investments Commission Act 2001 (Cth), the accounting standards developed by the AASB are enabled by the Corporations Act. The preparation and disclosure of financial statements serve a very important purpose by ensuring the accountability of a company's management.


The ASX is responsible for ensuring compliance by listed entities with the Listing Rules and the ASX Settlement Operating Rules (Operating Rules). It has certain limited powers, including suspension, delisting, ordering rectification and referral of matters and investigations to ASIC.

The ASX's powers to investigate are curtailed in many respects as it is compelled by the Corporations Act to defer to the authority of ASIC in regard to various issues, such as investigation of breaches of the Corporations Act. Nevertheless, the ASX and ASIC often work together to ensure that listed entities are subject to an appropriate degree of supervision.


As the chief corporate regulator, ASIC serves a variety of different and important functions, including:

  1. identifying breaches of the Market Integrity Rules;
  2. overseeing financial markets, participants of these markets and trading on domestic licensed financial markets such as the ASX;
  3. enforcing compliance with corporate governance standards and punishing breaches of conduct obligations; and
  4. administering and governing the administration of the Corporations Act.

For breaches of the Market Integrity Rules, ASIC maintains accountability through enforceable undertakings and infringement notices.

iii Australian Prudential Regulatory Authority

As Australia's independent prudential authority in the banking, insurance and superannuation industries, the Australian Prudential Regulatory Authority (APRA) creates prudential standards on risk management, corporate governance and financial security, for participants in these markets.

In the event of a potential breach of prudential standards, APRA generally seeks to achieve compliance through cooperation and negotiation with a company's directors and management. However, APRA does possess enforcement powers, which it will exercise if a company or its officers resist efforts from APRA to reach a mutually beneficial solution by cooperation.

iv Australian Competition and Consumer Commission

The Australian Competition and Consumer Commission (ACCC) is the regulator of federal laws relating to competition, fair trading and consumer protection and it is responsible for enforcing various sections of the Competition and Consumer Act 2010 (Cth), such as those relating to consumer protection, product safety, industry codes and anti-competitive corporate practices.

Recent developments

ASIC established the Close and Continuous Monitoring (CCM) Program in October 2018, which involves the placement of ASIC employees in significant financial services institutions, currently AMP, Australia and New Zealand Banking Group, Commonwealth Bank of Australia (CBA), National Australia Bank and Westpac Banking Corporation, to undertake surveillance. These ASIC employees are tasked with reviewing the non-financial risk practices of banking staff, especially those in positions of leadership and seniority. Since launching the CCM Program in October 2018, ASIC has:

  1. interviewed more than 300 banking employees;
  2. placed ASIC employees in banking institutions for the majority of business days; and
  3. undertaken reviews of thousands of documents.4

ASIC also established the Corporate Governance Taskforce, which undertook a thorough review of the specific corporate governance practices engaged in by Australia's largest listed entities. The Corporate Governance Taskforce restricted its focus to seven of Australia's largest ASX-listed financial institutions and was primarily interested in asking two questions:

  1. How was the discretion of management exercised in regard to the issue of remuneration?
  2. How did company officers navigate risk?

Unlike the CCM Program, the Corporate Governance Taskforce was largely a passive exercise. However, it did express some interest in practical changes, such as encouraging officers to change:

  1. how they treated investors and consumers;
  2. their disclosure habits, particularly in regard to the timing and clarity of their disclosures;
  3. how and when they take accountability for their actions; and
  4. how they engage in other corporate governance measures.

General trends

The relative stability of the corporate governance regime in Australia has been disrupted by two relatively recent events: the APRA inquiry into the CBA and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Banking Royal Commission). The final CBA report produced by APRA was published on 1 May 2018 and the Banking Royal Commission commenced at the start of 2018. Andrew Clarke, Professor at the College of Law and Justice, described this period of time in 2018 as 'the perfect corporate storm'.5 These events produced a heightened awareness of corporate culture and increased public scrutiny of the alleged dishonesty and 'hubris'6 which was said to be widespread in large financial services institutions.

The Hon. Kenneth Hayne AC QC was appointed as Commissioner to oversee the Banking Royal Commission. The Commissioner released his interim report on 28 September 2018 and his final report on 1 February 2019 (Final Report). Three key themes arose from Commissioner Hayne's pronouncements following the release of the findings from the Banking Royal Commission:

  1. the law must be clear so that businesses understand their legal obligations (i.e. substantive amendments to the law to simplify it);
  2. businesses must obey the law and foster a culture that drives compliance; and
  3. regulators must enforce the law and act on contraventions, asking themselves 'why not litigate' rather than 'why litigate'.

Further, APRA's report identified four damaging cultural practices, which were then prevalent in the CBA:

  1. entrenched complacency;
  2. a reactive rather than proactive approach to risks;
  3. an insular culture and an inability to learn from past mistakes; and
  4. preoccupation with obtaining consensus.7

Corporate leadership

In his Final Report, Commissioner Hayne noted: 'Culture, governance and remuneration march together. Improvements in one area will reinforce improvements in others; inaction in one area will undermine progress in others.'8 The following organisations have published best practice principles:

  1. the Australian Council of Superannuation Investors (ACSI);9
  2. the Council;
  3. the Australian Institute of Company Directors (AICD);10 and
  4. the Investor Group on Climate Change.

i Board structure and practices

Public companies are required to have a minimum of three directors (with at least two residing in Australia).11 In Australia, the board is structured as a single tier with one chair and executive and non-executive directors.

For listed entities, compliance with the CGPR constitutes a reporting requirement.12 The CGPR recommends, among other things, that listed companies establish board charters,13 diversity policies,14 performance evaluations (for the board, committees, directors and senior executives)15 and separate board committees.16 Gender diversity is also a key recommendation, with listed entities included in the S&P/ASX300 Index expressly required to have a target of no less than 30 per cent of directors of each gender holding board positions.17 ASX200 companies achieved this objective in December 2019.18

ii Board and chair

The board must ensure that proper accountability systems and mechanisms are in place and that shareholders are kept informed in accordance with the entity's continuous disclosure obligations. The chair's role is to ensure that appropriate board structures and procedures are in place. The general view in Australia is that the roles of CEO and chair should remain separate.19

The board should comprise a majority of independent non-executive directors20 and must maintain oversight of the CEO and senior management.

iii Delegation

Subject to the company's constitution, directors may delegate their powers and are responsible for a delegate's exercise of power unless he or she reasonably believes after proper inquiry that the delegate will comply with the director's duties and is reliable and competent.21

In circumstances where a market announcement was 'a key statement in relation to a highly significant restructure' and where management has brought the matter to the board, none of the directors are entitled to 'abdicate responsibility by delegating his or her duty to a fellow director'.22 In this regard, non-executive directors also cannot avoid liability by pleading reliance on management or expert advisers.

There is a core, irreducible requirement for directors to take all reasonable steps to be in a position to guide and monitor the company.23

Board committees perform a critical role in determining matters where executive directors are faced with a conflict of interest24 and assist directors to obtain the information required to discharge their duties, including to challenge information or senior management, or both. As noted in the Final Report, '[t]he task of the board is overall superintendence of the company, not its day-to-day management.'25 It is a requirement for listed entities to have nomination,26 audit,27 risk28 and remuneration committees.29

During takeover transactions, committees should only comprise directors not associated with the counterparty to the takeover and the establishment of an independent takeover committee may be required.30

iv Remuneration

It is expected that listed entities will remunerate fairly and responsibly.31 ACSI notes that non-executive directors should generally only be remunerated by way of reasonable fixed fees, and should not include variable remuneration (which may include short-term (i.e. annual payment in cash or securities) and long-term (i.e. options or securities-based) incentives) which may be more appropriate for executive directors.32

For listed companies, remuneration reports are required to be adopted by shareholders at every AGM.33 Voting on the resolutions to the report and the operation of the 'two strikes' rule is a mechanism for shareholders to hold the board accountable for excessive remuneration where more than 25 per cent of the votes cast by shareholders at the AGM are against remuneration reports in consecutive years.34 If this occurs, shareholders must then be asked to vote on a spill motion. Shareholders can also use this mechanism to express dissatisfaction with other governance and performance issues.

v Directors

In Australia, there are federal and state laws that impose liability on directors and senior managers for corporate breaches of laws other than the Corporations Act, including environmental, health and workplace safety laws and securities and competition laws. Directors must:

  1. exercise their powers and discharge their duties with a reasonable degree of care and diligence;35
  2. act in good faith in the best interests of the company or for a proper purpose;36
  3. not misuse their position or improperly use information obtained from their position as director to obtain an advantage for themselves or a third party or to cause detriment to the company;37 and
  4. prevent the company from trading while insolvent.38

Companies often create a conflicts of interest policy as a 'best-practice defence'.39 Directors' duties must be observed carefully, as the consequences of breaching duties can be severe. There are legal protections available to directors in certain circumstances, including:

  1. the business judgement rule: when directors are making a 'business judgement' and in doing so:
    • are acting in good faith and for a proper purpose;
    • do not have a material personal interest in the matter;
    • inform themselves to the extent they reasonably believe to be appropriate; and
    • rationally believe that the judgement is in the best interests of the company;
  2. directors will meet the requirement of exercising due care and diligence both under the Corporations Act and the common law; and
  3. reliance on information and advice: directors are entitled to rely on information or professional or expert advice from an employee, professional adviser or expert, another director or officer, or a board committee, provided the reliance was made in good faith, and after the director has made an independent assessment of the information or advice.

The purpose of the business judgement rule is to recognise that directors are expected to take advantage of business opportunities and engage in responsible risk taking. In practice, the rule has fallen short of this goal as it has not alleviated directors' concerns about liability. The ability to rely on information and advice has been diluted by courts postulating 'core irreducible duties' in certain areas. The Centro case requires directors to personally be financially literate and to understand the AASB accounting standards.

Other protections such as constitutional indemnities and insurances including directors and officers liability insurance are also commonly relied on in Australia. Additional duties may arise for directors of responsible entities, directors of life companies,40 superannuation trustees and authorised deposit taking institutions (ADIs). In addition to these duties, the Listing Rules impose continuous disclosure obligations. A company's obligation to continuously disclose market sensitive information is considered by the ASX to be critical to the market staying informed. Accordingly, directors should give due consideration to the company's communications strategy and market announcements or otherwise risk personal liability. This is reflected by the breach of directors' duties found by the High Court of Australia in the case of James Hardie Industries Limited.41

The role of an audit committee is to assist the board to discharge its duties in respect of the entity's financial performance, reporting and management.42 The Centro case raised the bar; directors must apply their own minds to, and review carefully, the financial statements and directors' report.43 Directors must ensure that the CEO and CFO provide a declaration stating that financial records have been properly maintained and that the financial statements give a true and fair view and comply with accounting standards.44

vi Appointment, nomination, term of office and succession

The CGPR stipulate a detailed process for the nomination and election of directors to the board of a listed entity. Candidates must have the requisite skills, capacity and experience to ensure that their duties can be discharged and that they can provide effective leadership to act in the best interests of the company. Nomination committees should be formed to provide recommendations to the board based on objective criteria, such as the CGPR.45

Generally, a company's constitution outlines the appointment process for directors. However, Listing Rule 14.4 provides that a director of a listed company must not hold the position of director without re-election past the third AGM following their appointment or three years after their appointment.46 While some bodies call for annual re-election of directors,47 staggered board re-election is commonly adopted in Australia. If a director serves a period of 10 years or more, the director's independence may need to be considered.48

Ongoing board succession processes ensure that board composition reflects an appropriate balance of skill, experience and subject matter expertise. This is often overseen by the nomination committee.49


Public companies are subject to a range of periodic reporting and continuous disclosure obligations, as well as disclosure rules for specific one-off events, mandated by the Corporations Act and Listing Rules. Circumstances in which the disclosure of information is mandated under the Corporations Act and Listing Rules include the following:

  1. periodic financial reporting;
  2. specific disclosures with respect to changes to fundraising, corporate control transactions and other changes to a company's capital structure; and
  3. timely or continuous disclosure of price sensitive information in relation to a company's securities.50

In particular, persons who, together with their associates, have relevant interests in voting shares representing 5 per cent or more of the votes in a listed company must disclose details of their relevant interest. If a person's relevant interest changes to below 5 per cent he or she ceases to have a substantial holding. If he or she makes a takeover bid, disclosure must also be made.51

The Corporations Act also requires a director of a listed public company to provide the ASX with details of his or her relevant interests in any securities of the company or a related body corporate within 14 days of his or her appointment (other than reappointment at the same meeting), the company's listing and any change in the director's interests.52 A listed entity must provide the same information to the ASX within five business days of these events, and when a director ceases to be a director.53

These disclosure obligations are supported by prohibitions on market misconduct, including insider trading, misleading and deceptive conduct, and other forms of market manipulation. In addition, shareholders are entitled to particular information when a general meeting is convened for certain purposes (e.g. to obtain shareholder approval for a related party transaction).

Listed companies are required to satisfy half-yearly and annual financial reporting obligations, each requiring preparation and lodgement of the following reports:54

  1. a financial report, comprising audited financial statements and notes to those statements, prepared in accordance with Australian accounting standards;
  2. a directors' report, which must include, amongst a range of other things, specific commentary regarding the company's operations and business, as well as a remuneration report detailing the remuneration of directors and key management personnel; and
  3. an auditor's report, obtained from the company's independent auditor.

This information is typically provided in the form of an annual report, which listed companies must provide to shareholders each financial year by the earlier of 21 days before the company's AGM (where the reports must be laid before the meeting) or four months after the end of the financial year.

According to guidance recently published by ASIC and the AASB with respect to effective disclosure, the focus of regulators and the market on climate-related financial risk disclosures is expected to heighten in the 2020 financial year.55 This follows the introduction of legislation requiring companies with a minimum annual turnover of A$100 million to report on the risks of modern slavery and actions taken to address such risks within their supply chains and operations.56

Complementing periodic reporting, the continuous disclosure regime imposed by the Listing Rules requires a listed entity to immediately disclose to the ASX, once an entity becomes aware of 'any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities' – commonly referred to as 'price sensitive' or 'material information'.57 The Listing Rules contain the following exception to the continuous disclosure obligation where one or more of the following five situations applies:58

  1. it would be a breach of a law to disclose the information;
  2. the information concerns an incomplete proposal or negotiation;
  3. the information comprises matters of supposition or is insufficiently definite to warrant disclosure;
  4. the information is generated for the internal management purposes of the entity; or
  5. the information is a trade secret;
  6. the information is confidential and the ASX has not formed the view that the information has ceased to be confidential; and
  7. a reasonable person would not expect the information to be disclosed.

The continuous disclosure obligation is reinforced under the Corporations Act, which prescribes an offence for a listed company that fails to comply with its continuous disclosure obligations where the information in question is both market sensitive and 'not generally available'. To assist with satisfying its continuous disclosure obligations, a listed company will usually adopt a continuous disclosure policy, as encouraged by the CGPR.

Recent years have seen significantly increased shareholder class action activity for breach of continuous disclosure obligations, particularly in cases of downgrades to earnings forecasts previously disclosed by companies or reflecting market consensus.59

Corporate responsibility

The year 2019 brought unprecedented change to the landscape of Australian corporate responsibility in the wake of the Banking Royal Commission, the introduction of laws and regulations that impact the internal culture and values of an organisation, and heightened public scrutiny on corporate ethics.

In response to this, Australian boards have had to adapt and adopt significant internal changes to promote proper corporate responsibility.

i Embedding the appropriate culture

Traditionally, legislation and standards regulated Australian companies' behaviour and external transactions. In 2019 Australian law makers and regulators increasingly sought to regulate the 'interior' of Australian organisations by seeking to impact organisational culture, values and intentions.60 In addition to requirements to publicly report environmental and social risks in their business, including climate risks and modern slavery practices, companies are also now subject to comprehensive whistleblowing protection legislation as a further safeguard for corporate ethics.61

To address this evolving legislative environment and to meet rising community expectations of corporate behaviour, boards must continually assess organisational culture. Corporate responsibility is as much about policing conduct as it is facilitating a culture of ethical behaviour and decision-making. Reporting to boards must be as comprehensive as possible in relation to organisational conduct and culture.

Boards should encourage a culture that positively impacts on the interests of multiple stakeholders, including customers, employees, regulators and the community. Metrics should not be confined to financial targets; both qualitative and quantitative data sources need to be accessed to provide a holistic picture of the organisation's impact on all stakeholders.62

Boards must seek views from all organisational levels. Management behaviour must mirror the 'tone at the top', created by the board, for consistency of values and intentions throughout the organisation.

To operate effectively, Australian companies are recommended as often as reasonably possible to:63

  1. assess their culture and governance;
  2. identify any problems with that culture and governance;
  3. deal with those problems; and
  4. determine whether any changes made have been effective.

ii Listed entities

Entities listed on the ASX should instil and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly.64 The ASX encourages boards to approve the organisation's statement of values and to hold senior executives accountable for imparting those values across the organisation.65 Listed entities are also recommended to have and disclose a code of conduct for directors, senior executives and employees and ensure that the board or a committee of the board is informed of any material breaches of that code.66

ASX-listed entities must report against these recommendations and, to the extent that they have not adopted or implemented any recommendation, they must provide a detailed explanation as to the reasons that they have not.67

While these recommendations and obligations apply only to listed entities, it has a cascading effect on corporate Australia and reflects the ASX's view of the critical relationship that ethical and responsible culture has to good governance.

iii Management and reporting of non-financial risk

Heightened focus on corporate responsibility brings a commensurate need to properly address broad categories of risk. Historically, companies have focused on risks that directly affect financial performance, deprioritising other categories and sources of risk including legal noncompliance, dishonest and misleading conduct, and unfair customer treatment.

Boards need to increase attention to managing these 'non-financial' risks. This often requires an uplift in capability, frameworks and supporting systems.

In particular, Australian stakeholders, including institutional investors, credit ratings agencies and prudential regulators, now regard climate change as a significant economic and financial risk over both the long- and shorter-term.68 Such risks arise not only from the physical or ecological impacts of climate change, but associated economic transition risks and litigation exposures from both regulators and private parties.69 The recent bushfire crisis over the Australian summer has emphasised the reality of climate change risk in Australia. Proper reporting on these risks for listed entities has become a major focus of Australian corporate regulators.70

iv Remuneration and incentives

Australian companies must align the remuneration of their officers and employees to encourage the management of non-financial risks and to promote a compliance culture within the organisation. As noted in the Final Report, culture, governance and remuneration reinforce each other, 71 for better or worse.

v Corporate responsibility and directors' duties

It is accepted in Australia that the duty upon directors to discharge their powers and duties in good faith in the best interests of the corporation72 is not confined solely to the pursuit of maximising short-term financial returns for shareholders. On the basis that the interests of all stakeholders associated with the corporation converge in the longer term, boards are expected to focus on achieving long-term financial advantage.73 A company is more likely to obtain long-term financial advantage 'if the entity conducts its business according to proper standards, treats its employees well and seeks to provide financial results to shareholders that, in the long run, are better than other investments of broadly similar risk'.74


i Shareholder rights and powers

The Corporations Act grants powers to shareholders of listed companies to influence a board in a number of ways, particularly by granting shareholders the power to call or require the calling of shareholders meetings and propose members' resolutions.

In most instances, the shares held in Australian listed companies are all of the same share class (usually ordinary class shares) and generally the only difference between shareholders is the number of shares held. Therefore, the powers and rights of each shareholder largely derive from the number of shares held.

The right of shareholders to require or call meetings is enshrined in sections 249D and 249F of the Corporations Act. Shareholders who hold at least 5 per cent of the votes that may be cast at the general meeting can request the directors of a company to call and hold a general meeting of shareholders.75 The Corporations Act imposes a number of requirements on the form of this request. Directors must call the meeting within 21 days of the request being given to the company and the meeting must be held no later than two months after the request is given to the company. Additionally, shareholders who hold at least 5 per cent of the votes that may be cast at a general meeting may directly call and arrange to hold a general meeting.76 As shareholder activism gains favour in Australia, use of this right to call a meeting by shareholders is becoming more prevalent.

Shareholders with at least 5 per cent of the votes that may be cast on the resolution or at least 100 members who are entitled to vote at a general meeting may also give a company notice of a resolution that they propose to move at a general meeting.77 The Corporations Act sets out various requirements relating to the form of notice and to whom the notice must be directed. If a company has been given notice of a resolution under section 249N of the Corporations Act, the resolution is to be considered at the next general meeting that occurs more than two months after the notice is given.

Shareholders also have a variety of other rights and powers. In order to change or repeal its constitution, a company must pass a special resolution, which requires at least 75 per cent of the votes cast by shareholders at a general meeting to be in favour.78 Companies may also reduce their share capital by way of a share capital reduction or a share buy-back. A selective buy-back scheme, in which identical offers are not made to every shareholder, must first be permitted by a special resolution, which requires at least 75 per cent shareholder approval by votes cast.79 A selective reduction of capital must also be approved by a special resolution.80

ii Shareholders' duties and responsibilities

Shareholders are not subject to the duties outlined in the Australian corporate governance regulatory framework. Rather, shareholders, regardless of share class or number, may exercise certain rights and powers afforded to them by the Corporations Act, within the bounds of the company's constitution. However, shareholders cannot act in an unfettered manner.

iii Shareholder activism

In Australia, shareholder activism has evolved over the past decade from an occasional disruption to a real risk to be anticipated and managed by the board. Activist shareholders are typically institutional shareholders including superannuation funds, hedge funds, private equity investors and, increasingly, specialist activist funds (e.g., Manikay Partners' intervention in the MYOB Group scheme of arrangement (2019)).

Australian shareholder activism can generally be classified under the following categories (or some combination thereof):

  1. M&A activism – persuading the board to respond positively to a takeover proposal or other control transactions to spin-off divisions to unlock 'hidden value', divest of non-core businesses to eliminate a perceived 'conglomerate discount' or initiate a process to sell the company or put it into play;
  2. balance sheet or financial engineering activism – persuading the board to increase the gearing of the company to what is perceived to be a more optimal ratio, return excess capital to shareholders, reduce costs and focus on maximising return on invested capital; and
  3. governance activism – highlighting corporate governance lapses or invoking corporate governance 'best practices', sometimes this may be with a view to changing the composition of the board so that the new directors nominated by the activist can pursue M&A activism or balance sheet activism.

Shareholder activists may initially try to privately engage with boards to effect change. When this fails they may seek to take public action. Australia is a relatively friendly jurisdiction for shareholder activists due to a large number of shareholder protections enshrined in the Corporations Act and the risks and potential liabilities faced by directors. Some of the techniques that can be used by shareholder activists include:

  1. Putting forward proposed shareholder resolutions – shareholders of Australian listed companies who either alone or with other shareholders hold 5 per cent or more of the shares on issue can put forward shareholder resolutions for consideration at upcoming AGMs.
  2. Calling an extraordinary general meeting to spill the board – shareholders who meet the 5 per cent threshold described above can request the company to call a meeting to consider and vote on a board spill resolution. Alternatively, these shareholders may call and arrange to hold the meeting themselves, however, in this case they are responsible for the associated expenses.
  3. Applying pressure in the lead up to voting a resolution by:
    • buying further shares;
    • lobbying shareholders to vote in favour of (or against) a resolution;
    • applying to a court for an order to inspect company books and records; or
    • requesting access to details of proxy votes in advance of the meeting.

iv Takeover defences

In Australia, change of control in public and listed companies is primarily affected by takeovers and schemes of arrangement. Schemes of arrangement are a court-based process which requires the support of the target company board to implement. Accordingly, the only practical way for a hostile bidder to obtain control of a public company is by way of a takeover bid.

In a takeover bid in Australia a target company has 14 days from when the bidder's statement is sent to shareholders to send a target's statement to shareholders. However, practically there may be more time to prepare a target's statement as a bidder may take up to two months from a proposed off-market bid to send its bidder's statement to shareholders.

In managing hostile takeovers, Australian boards can employ pre-emptive and reactive strategies.

  1. Pre-emptive:
    • monitoring the company's share register;
    • maintaining current internal valuations so a board can objectively assess the merit of any takeover approach;
    • maintaining template market announcements, shareholder communications and target statements that can be quickly adapted and released; or
    • using convertible securities to create entrenched capital structure.
  2. Reactive:
    • persuading target company shareholders to reject the hostile bid;
    • persuading the hostile bidder to improve its offer price to a price at which the target's board is prepared to recommend the offer to shareholders;
    • seeking a better offer from a third party, either by engaging with a 'white knight' competing bidder, or creating an auction for control between the two independent bidders; or
    • making an application to the Takeovers Panel, the primary forum for disputes relating to takeover bids in Australia until a bid period is ended. The Takeovers Panel has broad powers, with its primary power to declare 'unacceptable circumstances' in the context of a takeover bid. Where the Takeovers Panel has made such a declaration it can make remedial orders to rectify the circumstances.

v Contact with shareholders

Shareholder communications are an integral part of the corporate governance framework in Australia as they not only enable boards and officers to gauge the shareholders but also provide a channel of communication with the broader shareholder base.

For public companies (listed or unlisted), these communications are typically facilitated through the forum of the AGM. Listed public companies are required under the CGPR to typically have an investor relations programme that is designed to facilitate effective two-way communication with the shareholders, involving scheduled and ad hoc interactions with institutional investors, retail investor groups, sell-side and buy-side analysts, proxy advisers and the financial media.81


The Banking Royal Commission and the APRA inquiry into the CBA has undoubtedly triggered a move towards greater regulation and more aggressive enforcement by regulators. The general public has become more wary of the potential for conflicts of interest to drive the wrong behaviours and create toxic cultures within many large financial services institutions.

ASIC has expressly adopted the 'why not litigate' approach that was recommended by Commissioner Hayne. The implementation of this trigger happy approach to litigation has produced significant changes in ASIC's mentality and operation and arguably reduced levels of cooperation from businesses.82 Similar to the ACCC, ASIC has:

  1. demonstrated a deep lack of trust in big business, having watched the evidence unfold in the Banking Royal Commission – particularly in how big business was approaching its engagement with ASIC;
  2. embraced the explicit recommendations of the Banking Royal Commission to enforce the law and act on contraventions; and
  3. embraced collaboration with the government to give it the legislative powers and resources it believes is necessary to better do its job.

Through measures like the CCM Program and the Corporate Governance Taskforce, ASIC developed greater insight into the relationship between corporate values and misbehaviour by directors and officers. The connection between culture and corporate governance is often spoken about, but rarely understood.

Legislation in Australia has evolved so that it now regularly includes broad prohibitions and provides very specific and limited exceptions. This has been seen to result in an arms race between legislators and advisers seeking to find methods for creative avoidance. This has resulted in Australia's current legal landscape – many areas of business are governed by arguably impenetrable or overly inclusive legislation that clearly imposes significant costs of compliance and additional risks on business. Given voluminous and arguably overbearing legislation, the lack of trust in business now seemingly entrenched in regulators (and the community), regulators' newfound or validated aggression and their desire to work with government to toughen up the regulatory regime for business, you have a powerful combination of factors to be considered by companies conducting business in Australia.

Commentators have begun questioning whether non-executive directors in fact need to become executives to discharge their duties. For the foreseeable future, it is highly likely Australian regulators will be aggressive, not just in their approach to enforcement but also in their approach to government regulation.


1 Jeremy Blackshaw, Kate Koidl and Bart Oude-Vrielink are partners and Lucy Wang is a lawyer at MinterEllison.

2 ASX, 'Corporate overview', ASX (Web Page) <;.

3 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019).

4 Australian Securities and Investments Commission, Annual Report 2018-19 (Report, 2019).

5 Andrew Clarke, 'The Corporation and Corporate Culture: A New Paradigm? (2019) 36 C&SLJ 596.

6 ibid 603.

7 ibid.

8 The Hon. Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) vol 1, 412.

9 Australian Council of Superannuation Investors, ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (Australian Council of Superannuation Investors, October 2019) 2.

10 Australian Institute of Company Directors, 'Find out more about who we are and what we do', Australian Institute of Company Directors (Web Page) <;.

11 Corporations Act 2001 (Cth) Section 201A.

12 ASX Listing Rules (as at 22 January 2020) r 4.10.3.

13 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 1.1.

14 ibid, Recommendation 1.5.

15 ibid, Recommendations 1.6 and 1.7.

16 ibid, Recommendations 2.1, 4.1, 7.1 and 8.1.

17 ibid, Recommendation 1.5.

18 Australian Institute of Company Directors, 'ASX 200 hits 30% women on boards', Australian Institute of Company Directors (Web Page, 19 December 2019) <;.

19 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 2.5.

20 ibid, Recommendation 2.4.

21 Corporations Act 2001 (Cth) Section 198D.

22 Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199 [260].

23 Australian Securities and Investments Commission (ASIC) v Healey (2011) 196 FCR 291.

24 Australian Council of Superannuation Investors, ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (Australian Council of Superannuation Investors, October 2019) 16.

25 The Hon. Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) vol 1, 412.

26 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 2.1.

27 Ibid, Recommendation 4.1.

28 Ibid, Recommendation 7.1.

29 Ibid, Recommendation 8.1.

30 Australian Council of Superannuation Investors, ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (Australian Council of Superannuation Investors, October 2019) 16 and 39.

31 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Principle 8.

32 Australian Council of Superannuation Investors, ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (Australian Council of Superannuation Investors, October 2019) 18.

33 Corporations Act 2001 (Cth) Section 300A.

34 Corporations Act 2001 (Cth) Section 250U.

35 Corporations Act 2001 (Cth) Sections 180 (in the case of a listed company) and 601FD(1)(b) (in the case of a listed trust).

36 Corporations Act 2001 (Cth) Section 181.

37 Corporations Act 2001 (Cth) Sections 182 and 183.

38 Corporations Act 2001 (Cth) Section 588G.

39 James Dunn, 'Managing conflicts of interest' (1 August 2017) Company Director Magazine.

40 Australian Securities and Investments Commission (ASIC) v Hellicar (2012) 247 CLR 345.

41 Australian Securities and Investments Commission (ASIC) v Healey (2011) 196 FCR 291.

42 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 4.1; Australian Council of Superannuation Investors, ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (Australian Council of Superannuation Investors, October 2019) 35.

43 Australian Securities and Investments Commission (ASIC) v Healey (2011) 196 FCR 291.

44 Corporations Act 2001 (Cth) s 295A; ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 4.2.

45 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 2.1.

46 ASX Listing Rules (as at 22 January 2020) r 14.4.

47 Australian Council of Superannuation Investors, ACSI Governance Guidelines: A guide to investor expectations of listed Australian Companies (Australian Council of Superannuation Investors, October 2019) 7.

48 ibid 15; ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 2.3.

49 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 2.1.

50 Mark Blair and Ian Ramsay, 'Mandatory Corporate Disclosure Rules and Securities Regulation' in Gordon Walker, Brent Fisse and Ian Ramsay (eds), Securities Regulation in Australia and New Zealand (LBC Information Services, 2nd ed, 1998) 55, 55-56.

51 Corporations Act 2001 (Cth) pt 6A.1.

52 Corporations Act 2001 (Cth) ss 205F, 205G, 300(11) and (12).

53 ASX Listing Rules (as at 22 January 2020) r 3.19A.

54 Corporations Act 2001 (Cth) ch 2M.

55 Sarah Barker, 'Climate risk and sustainability: ASIC guidance developments', MinterEllison Technical Update (Web Page, 26 August 2019) <;; Sarah Barker, Ellie Mullholland, 'Heightened expectations of climate-related disclosure and assurance' MinterEllison Technical Update (Web Page, 15 May 2019) <

56 Justine Nolan, 'Australia's Modern Slavery Act: Towards Meaningful Compliance' (2019) 19(56) Company and Securities Law Journal 104.

57 ASX Listing Rules (as at 22 January 2020) r 3.1.

58 ASX Listing Rules (as at 22 January 2020) r 3.1A.

59 Damian Grave, Leah Watterson and Helen Mould, 'Myer shareholder class action unlikely to dampen class filings', Australian Institute of Company Directors (Web Page, 30 October 2019) <;; Tony Featherstone, 'The growing impact of rising shareholder class actions', Australian Institute of Company Directors (Web Page, 27 September 2018) <;.

60 'A social licence: the future of business', Transforming business with MinterEllison: ideas and challenges that are shaping our future (MinterEllison, 19 August 2019).

61 Modern Slavery Act 2018 (Cth); Treasury Laws Amendment (Enhancing Whistleblower Projections) Act 2019 (Cth).

62 Rahoul Chowdry and Mark Standen, 'Delivering sustainable stakeholder value in a post Hayne Royal Commission world' MinterEllison Insight (Web Page, 17 December 2019) <;.

63 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 5.6; The Hon. Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019).

64 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Principle 3.

65 ibid, Recommendation 3.1.

66 ibid, Recommendation 3.2.

67 ASX Listing Rules (as at 22 January 2020) r 4.7.

68 MinterEllison, 'Are your finance & governance teams ready? Responding to heightened expectations on climate risk assurance & disclosure' (August 2019).

69 ibid.

70 See, eg, ASIC's update to ASIC Regulatory Guide 247 (Effective disclosure in an operating and financial review) to incorporate the types of climate change risk developed by the G20 Financial Stability Board's Taskforce on Climate Related Financial Disclosures.

71 The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) 412.

72 Corporations Act 2001 (Cth) s 181(1).

73 The Hon Justice Kenneth Hayne AC QC, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Final Report, February 2019) 403.

74 ibid.

75 Corporations Act 2001 (Cth) Section 249D.

76 Corporations Act 2001 (Cth) Section 249F.

77 Corporations Act 2001 (Cth) Section 249N.

78 Corporations Act 2001 (Cth) Section 136.

79 Corporations Act 2001 (Cth) Section 257D.

80 Corporations Act 2001 (Cth) Section 256B.

81 ASX Corporate Governance Council, Corporate Governance Principles and Recommendations (ASX Corporate Governance Council, 4th ed, 2019) Recommendation 6.2.

82 Australian Securities and Investments Commission, Annual Report 2018-19 (Report, 2019).

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