ASIC has confirmed that there is a significant problem in the new Two Strikes rule.
A legislative oversight means that chairs cannot vote undirected proxies on the remuneration report (see our Corporate Insights of 9 August).
The reasons for this are highly technical (see here for full details).
The Government is reportedly looking at a permanent legislative fix for the problem. Pending that fix, ASIC says that companies have four options when considering how to address the problem at their upcoming AGM:
make no change to the company's usual proxy form and ensure that the chair does not vote any undirected proxies on the remuneration report resolution;
change the company’s proxy form with a view to ensuring that there are more directed proxies, which can be counted in the vote on the remuneration report;
suggest to shareholders that they should consider nominating a proxy other than a member of the company’s key management personnel for the purposes of the remuneration report resolution; or
apply to ASIC for relief (which will be considered on a case-by-case basis).
ASIC admits that Parliament clearly intended that chairs could vote undirected proxies on the remuneration report. We would, therefore, expect that applications for relief will be granted fairly routinely. Nevertheless, companies should bear in mind that:
- as a statutory body, ASIC can only grant relief if it has been provided with all relevant information; and
- ASIC has limited manpower, so applications should be lodged as soon as possible to ensure that relief is obtained before AGM documentation has to be sent to shareholders.
The Government has now announced its intention to rectify this problem. However, whether the changes will be in place for this year's AGM is unclear (if not simply unlikely).
In a statement issued on the afternoon of 11 August, the relevant Minister, Mr Bradbury, said that the necessary amendments would be introduced in the Spring Parliamentary sittings.
The Spring sittings begin on 16 August and may not end until 30 November. Given that timeframe, we believe that most companies will still need to consider the options detailed above.