AICD FY22 regulatory priorities
The AICD advocates for fair, fit-for-purpose and modern regulations that support diligent directors in governing for growth. Our FY22 reform priorities include:
- Modern, fit-for-purpose corporate and governance law
- Balanced director liability settings that reflect the role of the board
- NFP regulation that supports and sustains good governance outcomes
- Sustainability reporting settings that are clear, consistent and reflect stakeholder needs
Australia’s new Director ID requirements commenced on 1 November. Directors must apply for their Director ID via the Australian Business Registry Service at the ATO. Directors will keep their unique number forever, across all eligible board roles.
- Current directors have 12 months to apply. New directors must apply within 28 days of appointment (until April 2022, after which Director IDs must be in place before appointment).
- To apply for your Director ID, you will be required to have a myGovID. Note that a myGovID is different to MyGov, the portal for accessing services from the ATO or Medicare.
- AICD Director ID updates
Public policy progress
This was a big year for governance policy, sparking debate and legislative review. Much of the COVID-19 temporary regulatory relief expired in the early part of the year — unfortunately, the virus and its impacts did not. The AICD’s focus shifted to permanent reform, with consultation, engagement and stakeholder collaboration driving our advocacy work.
Securities class actions & litigation funding
AICD’s 2021 reform priorities included a better balance for Australia’s securities class action settings to reduce the risk of opportunistic claims and lower the pressure on D&O insurance costs.
After a long campaign, in August reforms to the Corporations Act 2001 passed federal parliament, reintroducing a permanent “fault” component for civil breaches of continuous disclosure laws. The AICD was a vocal supporter of this contested reform, viewing it as a more appropriate and balanced threshold that brings Australia more in line with similar common law jurisdictions.
Importantly, the changes do not lessen Australia’s robust continuous disclosure rules. Any director who knowingly seeks to mislead the market, or who is reckless or negligent with respect to their disclosure obligations, will face substantial penalties — as they should. These are significant improvements to Australia’s corporate law that reflect AICD’s policy principles. The focus on Australia’s “hot” securities class action environment saw another long-standing AICD concern — regulation of litigation funders — progress, with the AICD contributing director views.
Modernising the Corporations Act
One of AICD’s long-standing policy priorities has been the modernising of corporate law. COVID-19 exposed outdated drafting, with temporary relief required to allow companies and directors to execute documents electronically, sign minute books and run virtual member meetings.
The AICD was a strong advocate for the current temporary relief on these issues. Over this year, we have been promoting making these changes permanent. In October, legislation to this effect was introduced into federal parliament. The Bill in its current form covers executing documents virtually and use of e-signatures (including for board minutes).
Meeting notices would be able to be distributed electronically, provided members have the option to choose their preferred format. The option of virtual AGMs would also be enabled on an ongoing basis — provided company constitutions allow this. Obligations for members to have a reasonable opportunity to participate continue, regardless of format. The Bill will also require that listed company AGMs decide all substantive resolutions by poll, not a show of hands.
The AICD is a strong supporter of modernising the law. Well-run hybrid and virtual AGMs can boost opportunities for shareholders and members to participate in meetings. However, some investor groups, have raised concerns that virtual AGMs could become the “norm” for ASX 300 companies — and be run in a way that reduces accountability. The AICD has issued good- practice guidance to directors and companies on running virtual AGMs and promoting participation and transparency.
Charities & NFPs
The AICD has contributed to policy work on not-for-profit fundraising reform (where positive traction is being made), Australian Charities and Not-for-profits Commission secrecy provisions and charity reporting thresholds, among other reform proposals. AICD joined other stakeholders in raising concerns about new regulations on unlawful activity by charities.
Governance practice leadership
The AICD is expanding its guidance on contemporary and emerging governance issues. Important releases in 2021 included:
- Climate risk governance
In August, the AICD supported the Climate Governance Initiative, one of an active network of global chapters working with the World Economic Forum to mobilise, educate and equip directors to address climate change at board level. AICD and MinterEllison launched a new Director Climate Governance Guide.
- Elevating stakeholder voices to the board
In April, the AICD released a detailed report on the board’s role in stakeholder governance, providing practical guidance and experienced director insights.
- Board’s role in preventing workplace sexual harassment
New resources respond to the Respect@Work report’s call for board education, including a tool, practical roadmap and member webinars and content.
- Joint guidance on virtual AGMs
The AICD, with the Law Council, Governance Institute and Australian Investor Relations Association, has issued good-practice guidance on virtual AGMs.
- Promoting board diversity
The AICD continues to work with the 30% Club to promote gender diversity on Australian boards. During 2021, we noted for the first time that there were no “male-only” boards on the ASX 200. The AICD’s Chairs Mentoring Program also continues, with more than 600 applicants for the 2021 intake.
- AICD-funded scholarships
To support our mission, the AICD directly funded 180 scholarships for directors of smaller charities, bushfire-affected communities and directors in regional communities. We also launched a First Nations director program, to be expanded in 2022.
Duties & liability
Promoting appropriately framed director liability provisions is an ongoing focus. The AICD has advocated for balanced liability settings over the past year, in areas from continuous disclosure to cyber governance. Clear accountability for directors who are negligent or deliberately breach their duties is critical. Equally, diligent directors acting with due care should not face excessive personal liability. The AICD has contributed to various regulatory proposals including the Financial Accountability Regime and proposed cyber governance standards, promoting appropriate recognition of the governance role of non-executive directors.
Insights & updates
The AICD continues to invest in member insights and research, including our marque Director Sentiment Index and the annual NFP Governance and Performance study. Member webinars and podcasts are also available — such as the popular Dismal Science podcast (with AICD chief economist Mark Thirlwell MAICD) and NFP Matters (with NFP sector lead Phil Butler GAICD).