December « 2010 « Australian Regulatory Compliance Review from Langes+ Lawyers

December 28, 2010

Website update

We have added a page in each section of the site which lists all the posts in that section. Just look for the Archived Posts Lists on the right hand side of each page.

The list for Australian Regulatory Compliance Review is currently populating and will appear shortly.

Pages are also now numbered (newest pages first) to help you navigate through the site if you can’t find what you want in our search engine (at the bottom of the left hand navigation bar) or in our Categories list.

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Posted 28th December 2010 by David Jacobson in Weblogs

Archived Posts Sitemap: Australian Regulatory Compliance Review

Welcome to the Archived Posts Sitemap which lists all the posts in this part of our site. We hope that this page makes it easier to find what you are looking for. Also try the search box at the bottom of the left hand navigation bar or the Categories section on the right.

Click on Expand All to show all the posts or Collapse All to just see this month’s posts.

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Posted 28th December 2010 by David Jacobson in Weblogs

December 21, 2010

Looking forward to 2011

Thank you for reading our news services over the past year. On behalf of the Langes+ team I wish you a happy, successful and healthy 2011.

If you are taking an extended break, we look forward to talking to you on your return.

Langes+ services will be available over the holiday season.

Put these dates in your calendars now if you haven’t already started planning:

1 January 2011
Responsible lending (ADI’s and registered finance companies) starts.
Commencement of paid parental leave scheme
Australian Consumer Law starts
Draft exit fees legislation
Diversity policy required for ASX listed companies

March 2011
Exposure draft mortgage facts sheet legislation
Exposure draft covered bonds legislation

April 2011
New National Business Names Register to start

May 2011
New Personal Property Securities Register to start

30 June 2011
deadline for issue of ACL licences for pre-1 July 2010 credit providers
Stage 2 credit reform ongoing
Trusts taxation law amendments

1 July 2011
Director and executive remuneration and governance legislation to start
SuperStream administration changes start (including use of tax file numbers as primary account identifiers)
inclusion of standard ACL wording in contracts for repair
revised EFT code
Privacy reforms

1 January 2012
standard ACL wording in warranties against defects

1 April 2012
deadline for use of Australian Credit Licence numbers

1 July 2012
Financial advice reforms due to start

1 July 2013
MySuper starts

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Posted 21st December 2010 by David Jacobson in Business Planning

December 20, 2010

No delivery of goods in cooling off period under Australian Consumer Law

The new Australian Consumer Law (ACL) commencing on 1 January 2011 includes a national law on “unsolicited consumer agreements” to replace existing State and Territory laws on door-to-door and telemarketing sales.

However there is an important change from current legislation regarding the operation of the mandatory cooling off period, which under the ACL is set at 10 business days: under the ACL, the supplier is not allowed to deliver goods during the cooling off period (s.86).

Existing State and Territory laws do not prohibit delivery of goods during the cooling off period. Some jurisdictions (all but New South Wales, Victoria and the ACT) prohibit the supply of services during the cooling off period, although exceptions are made for some emergency services.

This is a strange provision with an anti-consumer effect. By the time the buyer receives the goods, the cooling off period has already expired: if the buyer doesn’t like the goods when they arrive, the buyer has no right to return them and get a refund.

The regulations have a transitional period of 12 months to comply with the new cooling off rules.

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Posted 20th December 2010 by Patrick Dwyer in Consumer Law, Trade Practices

Director and executive remuneration and governance changes

The Government has released the exposure draft of the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011. If passed the Bill will implement the Government’s response to the recommendations made by the Productivity Commission in its inquiry into executive remuneration in Australia.

Consultation on the Bill will continue until 20 January 2011. The Government intends to introduce the Bill into Parliament in the first half of 2011 with an expected start date of 1 July 2011.

As part of its response to the Productivity Commission’s inquiry, the Government is also releasing a Treasury discussion paper for consultation on a proposal to ‘clawback’ remuneration paid to executives where the company’s financial statements are materially misstated. The Treasury discussion paper on the additional ‘clawback’ proposal will be open for public consultation until 30 March 2011.

Director and Executive Remuneration Bill

The key measures include:

for listed companies, strengthening the non-binding vote on the remuneration report, by requiring a vote for directors to stand for re-election if a board proceeds with its remuneration proposals despite the company’s remuneration report receivings a ‘no’ vote of 25 per cent or more of its shareholders at two consecutive annual general meetings (the ‘two-strikes’ rule). Where this occurs, shareholders will vote at the second AGM to determine whether the directors will need to stand for re-election within 90 days. If this resolution passes with 50 per cent or more of eligible votes cast, then the ‘spill meeting’ will take place within 90 days. The re-election resolution will be triggered where both strikes occur after 1 July 2011;
companies that are a disclosing entity will be required to disclose details in the remuneration report relating to the use of remuneration consultants. In addition, remuneration consultants are required to be engaged by non-executive directors, and must report to non-executive directors or the remuneration committee, rather than company executives. The proposed measures relating to the advice from remuneration consultants apply to advice given under contracts executed on or after commencement (1 July 2011);
for listed companies, key management personnel (KMP and their closely related parties will be prohibited from participating in the non-binding vote. In addition, KMP and their closely related parties will be prohibited from voting undirected proxies on all remuneration related resolutions. The proposed prohibition on KMP (and their closely related parties) voting undirected proxies in remuneration related resolutions applies in relation to voting on or after commencement (1 July 2011), irrespective of whether the matter that is the subject of the resolution relates to a time before, on or after 1 July 2011.
KMP and their closely related parties will be prohibited from hedging the KMP’s incentive remuneration. The proposed prohibition on hedging applies to entry into arrangements on or after commencement (1 July 2011), irrespective of whether the remuneration was for services rendered before, on or after 1 July 2011.
Public companies will be required to obtain the approval of its members for a declaration that there are no vacant board positions, should the number of board positions filled be less than the maximum number specified in the company’s constitution ( “no vacancy” rule). If agreed, the declaration lasts until the following AGM. Any appointment of a director made while the declaration is in place must be confirmed by a resolution of members at the following AGM, or the appointment lapses at the conclusion of that AGM. The provisions will apply in relation to the setting of board limits on or after the date commencement (1 July 2011).
For all companies, proxy holders (including the Chair) will be required to cast all of their directed proxies on all resolutions. The new provision will apply to polls demanded on or after the commencement of the provision, whether the proxy was appointed before, on or after that commencement (1 July 2011).
For groups, under the new law, remuneration disclosures will only be required for the KMP of the consolidated entity. The proposed measure applies in relation to remuneration reports for financial years starting on or after commencement (1 July 2011).

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Posted 20th December 2010 by David Jacobson in Corporate Governance, Corporations Act, Workplace

December 19, 2010

James Hardie Directors Win Appeal

Seven former non-executive directors of James Hardie have won their appeal against a decision that would have banned them from sitting on company boards for five years (see note on original decision here).

In a lengthy and complex decision (Morley & Ors v Australian Securities and Investments Commission [2010] NSWCA 331), a full bench of the NSW Court of Appeal has overturned a judgement that found the non-executive directors had breached their duty of care by approving a media release that the company had fully funded its asbestos diseases liabilities, when in fact there was a funding shortfall of more than $1 billion.

The full bench of the Court of Appeal, headed by Chief Justice James Spigelman, said the Australian Securities and Investments Commission did not prove the former non-executive directors breached their duty of care by approving the press release sent to the ASX. Importantly, Chief Justice Spigelman said that ASIC did not prove that the resolution approving the press release was passed and that ASIC had not called a key witness with “relevant knowledge” about whether the release was approved. The failure to call one of the legal advisers of JHIL “undermined the cogency of ASIC’s case,” Chief Justice Spiegelman said.

However, James Hardie lost its own appeal (see separate judgment James Hardie Industries NV v Australian Securities and Investments Commission [2010] NSWCA 332), when the Court upheld a ruling that the company made misleading statements to the Australian Securities Exchange (ASX) in 2002 about its ability to “meet all asbestos claims and as to remaining asbestos claims”. James Hardie also lost its appeal against a ruling that the company had breached continuous disclosure rules by failing to disclose steps taken to move the holding company offshore in March 2003.

The appeal by the former CFO Phillip Morley was also dismissed. The appeal by the former Secretary and General Counsel Peter Shafron was partly accepted.

The former chief executive Peter Macdonald, did not appeal his 15-year ban from company directorship and $350,000 fine.

ASIC is assessing the judgment and will announce whether or not it will seek special leave to appeal to the High Court from all or any aspects of the judgment shortly.

The decision is important for all company directors and officers and Langes+ will be providing a more detailed analysis of the decision and its implications soon.

Author: Kathleen Harris

UPDATE 14 January 2011: ASIC has announced it has filed applications in the High Court for special leave to appeal the decision of the New South Wales Court of Appeal in the James Hardie matter, insofar as that decision concerns the former non-executive directors and the former company secretary and general counsel of James Hardie Industries Limited.

UPDATE 20 January 2011: Former James Hardie general counsel and company secretary Peter Shafron has also applied to the High Court for special leave to appeal.

UPDATE 24 January 2011: Former James Hardie CFO Phillip Morley has also applied to the High Court for special leave to appeal.

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Posted 19th December 2010 by David Jacobson in Corporate Governance, Corporations Act

Trusts taxation law to be reviewed

The Assistant Treasurer has announced that the Government plans to introduce amendments before 30 June 2011 so that beneficiaries can continue to use the primary production averaging and farm management deposits provisions in a loss year.

To address the issues raised by the High Court decision in Commissioner of Taxation v Bamford , the Assistant Treasurer has also announced a public consultation process as the first step towards updating the trust income tax provisions in Division 6 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) and rewriting them into the 1997 Act.

Any options will seek to ensure that net taxable income of a trust is assessed primarily to beneficiaries. Trustees will continue to be assessed only to the extent that amounts of net taxable income are not otherwise assessable to beneficiaries. The options will not include the taxation of trusts as companies, which would be a major departure from the current law.

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Posted 19th December 2010 by David Jacobson in Business Planning, Tax

December 16, 2010

Superannuation reforms announced

The Assistant Treasurer has released the Government’s response to the Cooper Review Report.

MySuper
The Government will introduce a simple, low cost default superannuation product called MySuper to improve the simplicity, transparency and comparability of default superannuation products.

SuperStream
From 1 July 2011, the Government will commence the implementation of SuperStream, a package of measures designed to enhance administration of superannuation.

Self managed superannuation funds
The Government proposes increased oversight of SMSF service providers.

The SMSF registration and rollover processes will be amended to reduce the incidence of funds being illegally released from SMSFs. Proof of identity checks will be required for all people joining an SMSF, whether they are establishing a new fund or joining an existing fund. Identification measures will not apply retrospectively except for existing SMSFs wishing to organise rollovers from an APRA‐regulated fund.

New penalties will be introduced to prevent illegal early release.

The superannuation legislation will be amended to enable the ATO to enforce the requirement for SMSF assets to be separated from personal or employer assets.

The ATO will be provided with new regulatory powers to prevent and penalise breaches of the superannuation legislation.

Knowledge and competency requirements will be developed for SMSF service providers. ASIC will develop a mandatory SMSF specialist knowledge component of Regulatory Guide 146 to impose minimum training requirements on financial advisers providing services to SMSFs.

The Government will continue to allow SMSFs to invest in collectables and personal use assets, provided they are held in accordance with tightened legislative standards. These legislative standards will be developed in consultation with industry and will apply to new investments from 1 July 2011, with all holdings of collectables and personal use assets to comply by 1 July 2016.

The Government does not support some of the Review’s recommendations in relation to the SMSF sector. The ATO will not be provided with the power to issue binding rulings in relation to SMSFs. Data on SMSF borrowing will not be collected from credit providers, but will be collected directly from SMSFs as part of the ATO’s collection and publication of SMSF data. Investment in in‐house assets will not be prohibited and SMSF trustees will not be required to provide information to members on an annual basis.

Governance
The Government will increase the obligations of superannuation fund trustees to manage their fund’s superannuation assets prudently and in the best interests of all the members of the fund.

Timing and implementation of reforms
The use of tax file numbers as primary account identifiers will start on 1 July 2011. Most measures in the broader SuperStream package will be in place by 1 July 2015.

The tightening of restrictions on self managed superannuation fund investment in collectables and personal use assets will start on 1 July 2011. Most other measures relating to self managed superannuation funds will commence from 1 July 2012.

Superannuation funds will be able to offer a MySuper product from 1 July 2013.

The timing of the commencement of measures relating to governance, integrity and other regulatory settings will be determined following consultation.

Coordination with other reviews
A number of reforms relating to financial advice, commissions and disclosure issues will be subject to consultation through the Government’s Future of Financial Advice processes.

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Posted 16th December 2010 by David Jacobson in Superannuation

Banking competition hearings

The Senate Economics Committee’s Inquiry into Competition within the Australian banking sector has commenced with hearings set to resume in January.

You can download the submissions here and the transcripts here.

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Posted 16th December 2010 by David Jacobson in Financial Services

SMSF Compliance

It is expected that the Government’s response to the Cooper Review Report will endorse increased compliance obligations by SMSF trustees.

Trustees and beneficiaries of Self Managed Super Funds (SMSF’s) should ensure that the Fund remains compliant at all times. During the 2009/2010 year, 185 SMSF’s were made non-complaint by the Tax Office for serious non-compliance with superannuation laws. The financial and other consequences of being made non-compliant are extremely significant and include the fund paying tax at the highest marginal tax rate on the total assets held, and any income earned, by the fund in the year the fund is made non-complying.

The main breaches giving rise to SMSF’s being made non-compliant were:
• Providing loans to related parties;
• Releasing superannuation early;
• Serious and significant breaches of the ‘in house asset’ rules; and
• Refusal by the trustees to lodge returns.

The ‘in-house asset’ rule states that your fund can only have 5% of its assets invested as in-house assets. This means that if your fund has $500,000 in assets, only $25,000 of those assets can be in-house assets. What is an in-house asset? An in-house asset is an asset that is:
• a loan to, or an investment in, a related party of the fund;
• an investment in a related trust of the fund; or
• an asset of the fund that is subject to a lease or lease arrangement between the trustee of the fund and a related party of the fund.

Author: Katrina Nitschke

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Posted 16th December 2010 by David Jacobson in Superannuation