Tuesday, 17 May 2016

ASX to take a harder line on early stage IPOs

On 12 May, ASX released a consultation paper on its proposed changes to the admission requirements for a listing on ASX.  The media release and consultation paper can be found here.

On the same day, ASIC also released its own consultation paper and updated guidance to improve disclosure of historical financial information in prospectuses.  ASIC and ASX have worked closely in developing their respective papers.

ASX' key proposals include:

Equity incentive arrangements - is it time to review yours?

The lead up to the end of the financial year is the peak period for most organisations yearly budgeting and business planning.  Given this, it is an opportune time for companies to review key management remuneration including equity components. 

In particular, as part of their annual budgeting and business planning, companies should ensure that current equity incentive arrangements continue to be appropriate to reflect any updated focus of the organisation and having regard to revised budgets and KPIs for the coming financial year.

To ensure existing equity incentive arrangements remain relevant and reflective of the organisation’s goals, companies should:

Tuesday, 10 May 2016

Class actions – can investors now sue without proving direct reliance?

The NSW Supreme Court recently handed down its decision in Re HIH Insurance Limited (In Liq)[1]. This long-running saga began with the collapse 15 years ago of Australia’s (then) second largest insurance company, HIH Insurance Limited, and has since seen a royal commission, the imprisonment of various senior management figures, and losses totalling more than $5 billion.

This decision has attracted a lot of attention across the financial and corporate sectors.  The decision is the first in Australia to explicitly accept ‘indirect market-based causation’ in cases involving misleading or deceptive conduct.  This will potentially pave the way for investors to bring claims against listed companies who misled the market, without needing to establish direct reliance on the misleading information.

The case was brought by several shareholders of HIH who bought shares in the company in the three years leading up to its collapse.  In the case the parties agreed that HIH had released misleading financial results for the financial years ending 30 June 1999 and 2000, which overstated the company’s profits by some $92 million and $108 million respectively.  These overstatements related to the accounting treatment of complex reinsurance contracts entered into by subsidiaries of HIH.