EXPLANATORY STATEMENT
ASIC CORPORATIONS (AMENDMENT) INSTRUMENT 2015/455
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Amendment) Instrument 2015/455 (the amending instrument) under subsection 341(1) of the Corporations Act 2001 (the Act).
Subsection 341(1) provides that ASIC may make an order in writing in respect of a specified class of companies, registered schemes or disclosing entities, relieving directors, the companies, registered schemes or disclosing entities themselves, or auditors of the company, registered schemes or disclosing entities, from any of the requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4) of the Act.
This instrument is an amending instrument. Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005 and as applicable to the relevant powers because of section 5C of the Act), where an Act confers a power to make an instrument, the power includes a power exercisable in the like manner and subject to the like conditions (if any) to amend the instrument.
A. Amendment to ASIC Class Order [CO 14/632]
- Background
Accounting Standard AASB 2011-4 deleted certain individual key management personnel disclosures from AASB 124: Related Party Disclosures (AASB 124) as of 1 July 2013. The relevant disclosures were determined to be more in the nature of governance disclosures that are better dealt with as part of the Act and should be reported on in an entity’s remuneration report as opposed to in the notes to the financial statements.
The requirement to include the disclosures in the remuneration report was introduced into the Corporations Regulations 2001 (the Corporations Regulations) by the Corporations and Related Legislation Amendment Regulation 2013 (No.1) (the first amending regulation).
The new disclosures were included in subregulation 2M.3.03(1) and were effective for remuneration reports applying to financial years beginning on or after 1 July 2013.
Two issues arise with respect to the first amending regulation.
Firstly, the original requirements in AASB 124 were specifically restricted to requiring disclosure of equity instruments (such as shares and options) issued or issuable by the disclosing entity (such as a listed company) and any of its subsidiaries. The first amending regulation omitted to restrict the regulations to those equity instruments issued or issuable by the disclosing entity and its subsidiaries.
The first amending regulation therefore has the effect of requiring a director to disclose in a remuneration report all of his or her personal shareholdings in any company (where provided as remuneration), even those holdings unrelated to the company the remuneration report is being prepared for. This consequence appears unintentional as the Explanatory Statement to the first amending regulation makes it clear that intention was to directly transplant the requirements from AASB 124 into the Corporations Regulations for the purpose of related party disclosure.
Secondly, AASB 124 required the disclosures in relation to the equity instruments being disclosed to be separated into each class of equity instrument. The requirement for separate class disclosure was also omitted from subregulation 2M.3.03(1) of the Corporations Regulations. The loss of this more granular disclosure could detract from the informational value of the disclosure.
ASIC Class Order [CO 14/632] (the principal instrument) was made in June 2014 to address these issues on an interim basis pending further amendments to the Corporations Regulations. It initially applied in relation to financial years ended on or before 30 September 2014.
In November 2014, the Department of the Treasury released for public consultation an exposure draft of the Corporations Amendment (Remuneration Disclosures) Regulation 2014 (the exposure draft regulations). These exposure draft regulations will address, among other things, the issues addressed by the principal instrument. The exposure draft regulations indicate that the amendments will apply in relation to financial years ending on or after the day the amending regulation commences.
In December 2014, pending the commencement of the exposure draft regulations, the principal instrument was amended by ASIC Class Order [CO 14/885] to extend its operation to apply in relation to financial years ended on or before 31 March 2015.
The exposure draft regulations are now unlikely to commence by 30 June 2015.
2. Purpose of the instrument
The purpose of this amending instrument is to address the gap between the likely commencement date of the exposure draft regulations (including the financial years to which those foreshadowed amendments will apply) and the current operation of the principal instrument (including the financial years to which it currently applies).
In particular, the amending instrument will provide certainty to disclosing entities with financial years that end on or before 31 December 2015.
3. Operation of the instrument
This amending instrument amends the principal instrument by extending, for a period of 9 months, the operation of the principal instrument so that it will apply in relation to financial years ending on or before 31 December 2015.
4. Consultation
ASIC consulted with the Department of the Treasury before making this amending instrument.
ASIC did not engage in further consultation on the basis that the amendments foreshadowed by the exposure draft regulations were the subject of public consultation during November – December 2014 and that this amending instrument extends the existing relief for an interim period of 9 months to cover the period until the amendments foreshadowed by the exposure draft regulations become operative.