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Memo of Advice- The most significant of the recent reforms to the Corporations Act 2001 (Cth) in Australia is the policy embodied in the Corporate Amendments (Improving Accountability on Director and Executive Remuneration) Bill which was passed by the Ho

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Introduction

Memorandum of Advice TO: Sharon Strezleki, Partner Monash Lawyers FROM: Shyna Chow SUBJECT: The implications of the recent reforms to the Corporations Act DATE: 15th August 16, 2011 Facts The most significant of the recent reforms to the Corporations Act 2001 (Cth) in Australia is the policy embodied in the Corporate Amendments (Improving Accountability on Director and Executive Remuneration) Bill which was passed by the House of Representatives on 1 July 2011.1 This bill introduced the 'two strikes and you're out rule', which requires a board spill in case a company's remuneration report receives a 25% or more vote against it in two consecutive Annual General Meetings. Apart from that, the bill brought in a new rule requiring listed companies to declare the use of remuneration consultants. In addition, another rule was added to the Act stipulating that key management personnel and also their closely related parties should not vote on remuneration report or during any motion to spill the board.2. Implications of the reforms to executive remuneration The presence of the 'two strike' rule in the amended Act implies that all listed companies with constitutions that permit the board to set limits are prohibited from doing so unless a proposal to do so is approved by the shareholders through an ordinary resolution in a general meeting.3 Also, the directors of listed companies have to comply with disclosure requirements in regard to their engagement of remuneration consultants. Further, companies have to review their meeting procedures to ensure that key management personnel and also their closely related parties do not vote in relation to remuneration matters in compliance with the new amendments. ...read more.

Middle

References Austin and Black, (2011), Division 1 - General duties [ss 180-190B]: officers and employees [Accessed 15 august 2011] http://www.lexisnexis.com.au/pdf/austin-black-sample-annotation_s180.pdf Australian Securities Exchange (ASX), (2004) Principle 4: Safeguard integrity in financial reporting, [Accessed 15 august 2011] http://asx.ice4.interactiveinvestor.com.au/ASX0701/Corporate%20Governance%20Principles/EN/pdf_pages/page_0027.pdf Australian Securities Exchange (ASX), (2010), Corporate Governance Council, Corporate Governance Principles and Recommendations (2nd ed. 2007), [Accessed 15 august 2011] http://www.asx.net.au/documents/about/cg_principles_recommendations_with_2010_amendments.pdf Comino, V, (not dated), The Challenge of Corporate Law Enforcement in Australia, [Accessed 15 august 2011], http://www.clta.edu.au/professional/papers/conference2009/CominoCLTA09.pdf Commonwealth Consolidated Acts, (2001) Corporations Act 2001, [Accessed 15 august 2011] http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250u.html Commonwealth of Australia (1998), Corporate Law Economic Reform Program, Paper No. 3 (Directors' Duties and Corporate Governance: Facilitating Innovation and Protecting Investors, 1997 [Accessed 15 august 2011] http://www.treasury.gov.au/documents/264/PDF/clerp.pdf Constitution of the Registered Company, (not dated), [Accessed 15 august 2011] http://www.oup.com/uk/orc/bin/qanda/sample_chapters/judge_ch02.pdf Deringer F. B, (2004) Directors' duties in a group Situation, [Accessed 15 august 2011] http://www.freshfields.com/publications/pdfs/practices/8061.pdf Downie, A., (2011) The Centro matter: ASIC v Healey [2011] FCA 717 and breach of director's duties, [Accessed 15 august 2011], http://www.the-civil-lawyer.net/2011/06/centro-matter-asic-v-healey-2011-fca.html Federal Court of Australia, (2011), Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19 (18 February 2011), [Accessed 15 August 2011] http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/19.htm Fletcher, G., (2011), ASIC v Fortescue Metals Group Ltd [2011] FCAFC 19, [Accessed 15 August 2011] http://www.bransgroves.com.au/corporations/asic-v-fortescue-metals-group-2011-fcafc-19.html Fridman, S. (1998) "An Analysis of the Proper Purpose Rule" [Accessed 15 august 2011] http://www.austlii.edu.au/au/journals/BondLRev/1998/11.html Harrisch (2009) Australian corporate law: Director's and officer's duties, [Accessed 15 august 2011] http://www.scribd.com/doc/53908577/Harrisch16 Hicks, A. & Goo, S. H. (2008), Cases and materials on company law, Oxford University Press, New York Hill J. G., (not dated), Regulatory Responses to Global Corporate Scandals, Wisconsin International Law Journal, 23( 3), 367-416 Larelle C. ...read more.

Conclusion

[Accessed 15 august 2011] http://www.treasury.gov.au/documents/264/PDF/clerp.pdf 4 Ibid 5 Thomsons Lawyers, (Corporate alert, A director's duty to review accounts - the Centro decision, 2011) [Accessed 15 august 2011] http://www.thomsonslawyers.com.au/awms/Upload/Files/publications/2011/Corporate%20Alert%20-%20A%20director%27s%20duty%20to%20review%20accounts%20-%20the%20Centro%20decision%20July%202011.pdf 6 A B Leibler (The Centro decision: ASIC v Healey, 2011) [Accessed 15 august 2011] http://www.abl.com.au/ablattach/ablcasenote210711.pdf 7 Federal Court of Australia, (Australian Securities and Investments Commission v Fortescue Metals Group Ltd) [2011] FCAFC 19 (18 February 2011), [Accessed 15 August 2011]http://www.austlii.edu.au/au/cases/cth/FCAFC/2011/19.html 8 A B Leibler, (ASIC wins in Fortescue Metals appeal: Clarity on interpreting continuous disclosure requirements under the Corporations Act, 2011) [Accessed 15 August 2011] http://www.abl.com.au/ablattach/ablcasenote020311.pdf 9 A B Leibler (The Centro decision: ASIC v Healey, 2011) [Accessed 15 August 2011] http://www.abl.com.au/ablattach/ablcasenote210711.pdf 10 J Lowry, "The Recognition of Directors Owing Fiduciary Duties to Creditors - RePantone 485 Ltd and Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd," (International Corporate Rescue Journal, 2004)1(1), [Accessed 16 August 2011] http://www.chasecambria.com/site/journal/article.php?id=83 11 Australian Securities Exchange (ASX), (Corporate Governance Council, Corporate Governance Principles and Recommendations (2nd ed. 2007), [Accessed 15 august 2011] http://www.asx.net.au/documents/about/cg_principles_recommendations_with_2010_amendments.pdf 12 Ibid 13 A Downie, (The Centro matter: ASIC v Healey [2011] FCA 717 and breach of director's duties, 2011) [Accessed 15 august 2011] http://www.the-civil-lawyer.net/2011/06/centro-matter-asic-v-healey-2011-fca.html 14 A B Leibler (The Centro decision: ASIC v Healey, 2011) [Accessed 15 august 2011] http://www.abl.com.au/ablattach/ablcasenote210711.pdf 15 Harrisch, (Australian corporate law: Director's and officer's duties, 2009)[Accessed 15 august 2011] http://www.scribd.com/doc/53908577/Harrisch16 16 Parliament of Australia, Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 (2011) [Accessed 15 August 2011] http://www.aph.gov.au/library/pubs/bd/2010-11/11bd083.pdf 17 J G Hill, "Regulatory Responses to Global Corporate Scandals," (Wisconsin International Law Journal 23( 3): 394. 18 Commonwealth Consolidated Acts, (Corporations Act 2001, 2001) [Accessed 15 August 2011] http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250u.html 19 A B Leibler (The Centro decision: ASIC v Healey, 2011) [Accessed 15 august 2011] http://www.abl.com.au/ablattach/ablcasenote210711.pdf 20 Commonwealth Consolidated Acts, (Corporations Act 2001, 2001) [Accessed 15 August 2011] http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250u.html ?? ?? ?? ?? ...read more.

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