CORPORATIONS AMENDMENT (IMPROVING ACCOUNTABILITY ON DIRECTOR AND EXECUTIVE REMUNERATION) BILL 2011

i Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

Contents

1 Short

title

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2 Commencement

.................................................................................

3 Schedule(s)

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Schedule 1--Amendment of the Corporations Act 2001

Part 1--Remuneration

Part 2--Limits on number of directors

Part 3--Voting by proxies as directed

Part 4--Application provisions

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 1

A Bill for an Act to amend the law relating to

corporations, and for related purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Corporations Amendment (Improving

Accountability on Director and Executive Remuneration) Act 2011.

2 Commencement

This Act commences on 1 July 2011.

3 Schedule(s)

Each Act that is specified in a Schedule to this Act is amended or

repealed as set out in the applicable items in the Schedule

Amendment of the Corporations Act 2001 Schedule 1

Remuneration Part 1

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 3

Schedule 1--Amendment of the Corporations

Act 2001

Part 1--Remuneration

1 Section 9

Insert:

closely related party of a member of the key management

personnel for an entity means:

(a) a spouse or child of the member; or

(b) a child of the member's spouse; or

(d) anyone else who is one of the member's family and may be

expected to influence the member, or be influenced by the

member, in the member's dealings with the entity; or

(e) a company the member controls; or

(f) a person prescribed by the regulations for the purposes of this

paragraph.

2 Section 9

Insert:

key management personnel for an entity has the same meaning as

in the accounting standards.

3 Section 9

Insert:

remuneration committee has the meaning given by paragraph

206K(2)(b).

4 Section 9

Insert:

remuneration consultant means a person:

(a) who makes a remuneration recommendation under a contract

for services with the company to whose key management

personnel the recommendation relates; and

Schedule 1 Amendment of the Corporations Act 2001

Part 1 Remuneration

4 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

(b) who is not an officer or employee of the company.

5 Section 9

Insert:

remuneration recommendation has the meaning given by

section 9B.

6 At the end of Division 1 of Part 1.2 of Chapter 1

Add:

9B Meaning of remuneration recommendation

(1)

remuneration recommendation is:

(a) a recommendation about either or both of the following:

(i) how much the remuneration should be;

(ii) what elements the remuneration should have;

for one or more members of the key management personnel

for a company; or

(b) a recommendation or advice about a matter or of a kind

prescribed by the regulations.

(2) None of the following is a remuneration recommendation (even if

it would otherwise be covered by subsection (1)):

(a) advice about the operation of the law (including tax law);

(b) advice about the operation of accounting principles (for

example, about how options should be valued);

practice;

(d) the provision of facts;

(e) the provision of information of a general nature relevant to

all employees of the company;

(f) a recommendation, or advice or information, of a kind

prescribed by the regulations.

(3) Subsection (2) does not limit the things that are not remuneration

recommendations, nor does it mean that something specified in that

subsection would otherwise be a remuneration recommendation

within the meaning of subsection (1).

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Remuneration Part 1

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(4) ASIC may by writing declare that subsection (1) does not apply to

a specified recommendation or specified advice, but may do so

only if ASIC is satisfied that it would be unreasonable in the

circumstances for the advice or recommendation to be a

remuneration recommendation. The declaration has effect

accordingly. The declaration is not a legislative instrument.

7 After section 111AN

Insert:

111ANA Requirements relating to remuneration recommendations

in relation to key management personnel

There are special requirements in Part 2D.8 for remuneration

recommendations in relation to key management personnel for

disclosing entities that are companies.

8 At the end of Chapter 2D

Add:

Part 2D.7--Ban on hedging remuneration of key

management personnel

206J No hedging of remuneration of key management personnel

(1) A member of the key management personnel for a company that is

a disclosing entity, or a closely related party of such a member,

must not enter into an arrangement (with anyone) if the

arrangement would have the effect of limiting the exposure of the

member to risk relating to an element of the member's

remuneration that:

(a) has not vested in the member; or

(b) has vested in the member but remains subject to a holding

lock.

(2) Without limiting paragraph (1)(a), remuneration that is not payable

to a member until a particular day is, until that day, remuneration

that has not vested in the member.

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Part 1 Remuneration

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Remuneration) Bill 2011 No. , 2011

(3) In determining whether an arrangement has the effect described in

subsection (1) in relation to an element of remuneration described

in that subsection, regard is to be had to the regulations (if any)

made for the purposes of this subsection.

(4) A member of the key management personnel for a company who

contravenes subsection (1) commits an offence.

(5) An offence against subsection (4) is an offence of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

(6) A person commits an offence if:

(a) the person is a member of the key management personnel for

a company; and

(b) a closely related party of the member contravenes

subsection (1) in relation to the member; and

(7) A closely related party of a member of the key management

personnel for a company commits an offence if the party

intentionally contravenes subsection (1) in relation to the member.

(8) ASIC may by writing declare that subsection (1) does not apply to

a specified arrangement, but may do so only if ASIC is satisfied

that the operation of that subsection would be unreasonable in the

circumstances. The declaration has effect accordingly. The

declaration is not a legislative instrument.

Note:

A defendant bears an evidential burden in relation to the matter in

subsection (8): see subsection 13.3(3) of the Criminal Code.

Part 2D.8--Remuneration recommendations in

relation to key management personnel for

disclosing entities

206K Board to approve remuneration consultants

(1) This section applies to a contract (a remuneration consultancy

contract):

(a) that is for services that include making a remuneration

recommendation in relation to one or more members of the

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key management personnel for a company that is a disclosing

entity; and

(b) that is between the company and a person (the proposed

consultant) who, by making the recommendation under the

contract, will be a remuneration consultant.

(2) Before a company enters into a remuneration consultancy contract,

the proposed consultant must be approved by:

(a) the directors of the company; or

(b) the members of a committee (the remuneration committee)

that:

(i) is a committee of the board of directors of the company;

and

(ii) has functions relating to the remuneration of key

management personnel for the company.

(3) A contravention of subsection (2):

(a) is not an offence except as provided by subsection (4); and

(b) does not affect the validity of the contract.

(4) The company commits an offence if, at the time the company

enters into the contract, the proposed consultant has not been

approved in accordance with subsection (2).

(5) An offence against subsection (4) is an offence of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

206L Remuneration recommendation by remuneration consultants

(1) This section applies to a remuneration recommendation made by a

remuneration consultant in relation to one or more members of the

key management personnel for a company that is a disclosing

entity.

(2) The remuneration consultant must provide the recommendation

directly to either or both of the following:

(a) the directors of the company;

(b) the members of the remuneration committee (if any).

(3) However, the remuneration consultant must not provide the

recommendation to a person who is an executive director of the

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Part 1 Remuneration

8 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

company unless all the directors of the company are executive

directors of the company.

(4) The remuneration consultant must not provide the recommendation

to a person who is neither a director of the company nor a member

of the remuneration committee.

(5) If the remuneration consultant contravenes subsection (2) the

remuneration consultant is not guilty of an offence. This does not

prevent the remuneration consultant from being guilty of an

offence for contravening subsection (3) or (4).

Note:

Subsection 1311(1) makes it an offence for the remuneration

consultant to contravene subsection (3) or (4).

(6) This section does not prevent someone other than the remuneration

consultant from providing the recommendation to a person who is

neither a director of the company nor a member of the

remuneration committee.

206M Declaration by remuneration consultant

(1) This section applies to a remuneration consultant who makes a

remuneration recommendation in relation to one or more members

of the key management personnel for a company that is a

disclosing entity.

(2) The remuneration consultant must include with the

recommendation a declaration about whether the consultant's

recommendation is made free from undue influence by the member

or members of the key management personnel to whom the

recommendation relates.

Note:

Failure to comply with this subsection is an offence: see subsection

1311(1).

(3) An offence based on subsection (2) is an offence of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

9 Subsection 249L(2)

Repeal the subsection, substitute:

(2) The notice of the AGM of a listed company must also:

Amendment of the Corporations Act 2001 Schedule 1

Remuneration Part 1

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Bill 2011 No. , 2011 9

(a) inform members that the resolution referred to in subsection

250R(2) (resolution on remuneration report) will be put at the

AGM; and

(b) if at the previous AGM at least 25% of the votes cast on a

resolution that the remuneration report be adopted were

against adoption of the report (but the same was not the case

at the AGM before that):

(i) explain the circumstances in which subsection 250V(1)

would apply; and

(ii) inform members that the resolution described in

subsection 250V(1) as the spill resolution will be put at

the AGM if that subsection applies.

Note:

Subsection 250R(2) requires a resolution to adopt a remuneration

report for a listed company to be put to the vote at the company's

AGM.

10 Before section 250C

Insert:

250BD Proxy voting by key management personnel or closely

related parties

(1) A person appointed as a proxy must not vote, on the basis of that

appointment, on a resolution connected directly or indirectly with

the remuneration of a member of the key management personnel

for the company or, if the company is part of a consolidated entity,

for the entity if:

(a) the person is either:

(i) a member of the key management personnel for the

company or, if the company is part of a consolidated

entity, for the entity; or

(ii) a closely related party of a member of the key

management personnel for the company or, if the

company is part of a consolidated entity, for the entity;

and

(b) the appointment does not specify the way the proxy is to vote

on the resolution.

Note 1:

Examples of resolutions connected directly or indirectly with the

remuneration of a member of the key management personnel for the

company or entity include:

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Part 1 Remuneration

10 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

(a) resolutions that must be put to the vote under subsection 250R(2)

(about a resolution that the remuneration report for a listed

company be adopted); and

(b) resolutions that must be put to the vote under subsection 250V(1)

(about fresh elections for directors at meetings arising from

concerns about remuneration reports); and

section 202A; and

(d) resolutions for the purposes of Chapter 2E (about public

companies and entities they control giving financial benefits to

related parties of public companies) affecting directors'

remuneration.

Note 2:

Subsections 250R(4) and 250V(2) also prevent the person from voting

on the resolution if it is a resolution that must be put to the vote under

subsection 250R(2) or 250V(1).

Note 3:

Section 224 may also prohibit the person from voting on the

resolution if it is a resolution for the purposes of Chapter 2E.

Note 4:

Failure to comply with this subsection is an offence: see subsection

1311(1).

(2) Subsection (1) does not apply if:

(a) the person is the chair of the meeting at which the resolution

is voted on; and

(b) the appointment expressly authorises the chair to exercise the

proxy even if the resolution is connected directly or indirectly

with the remuneration of a member of the key management

personnel for the company or, if the company is part of a

consolidated entity, for the entity.

Note:

A defendant bears an evidential burden in relation to the matter in

subsection (2): see subsection 13.3(3) of the Criminal Code.

(3) ASIC may by writing declare that:

(a) subsection (1) does not apply to a specified resolution; or

(b) subsection (1) does not prevent the casting of a vote, on a

specified resolution, by or on behalf of a specified entity;

but may do so only if satisfied that the declaration will not cause

unfair prejudice to the interests of any member of the company.

The declaration has effect accordingly. The declaration is not a

legislative instrument.

Note:

A defendant bears an evidential burden in relation to the matter in

subsection (3): see subsection 13.3(3) of the Criminal Code.

(4) A vote cast in contravention of subsection (1) is taken not to have

been cast. This subsection has effect for the purposes of this Act

Amendment of the Corporations Act 2001 Schedule 1

Remuneration Part 1

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Bill 2011 No. , 2011 11

except subsection (1) and subsections 250R(4) and (7), and

section 1311 and Schedule 3 so far as they relate to any of those

subsections.

Note:

This means the vote is not counted in working out a percentage of

votes cast or whether the resolution is passed, and does not affect the

validity of the resolution.

11 Subsection 250R(2) (note)

Omit "subsection 249L(2)", substitute "paragraph 249L(2)(a)".

Note:

The following heading to subsection 250R(2) is inserted "Advisory resolution for

adoption of remuneration report".

12 At the end of section 250R

Add:

Voting on advisory resolution by key management personnel or

closely related parties

(4) A vote on the resolution must not be cast (in any capacity) by or on

behalf of either of the following persons:

(a) a member of the key management personnel details of whose

remuneration are included in the remuneration report;

(b) a closely related party of such a member.

(5) However, a person described in subsection (4) may cast a vote on

the resolution if:

(a) the person does so as a proxy appointed by writing that

specifies how the proxy is to vote on the proposed resolution;

and

(b) the vote is not cast on behalf of a person described in

subsection (4).

(6) ASIC may by writing declare that:

(a) subsection (4) does not apply to a specified resolution; or

(b) subsection (4) does not prevent the casting of a vote, on a

specified resolution, by or on behalf of a specified entity;

but may do so only if satisfied that the declaration will not cause

unfair prejudice to the interests of any member of the listed

company. The declaration has effect accordingly. The declaration

is not a legislative instrument.

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Part 1 Remuneration

12 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

(7) A person described in subsection (4) contravenes this subsection if

a vote on the resolution is cast by or on behalf of the person in

contravention of that subsection (whether or not the resolution is

passed).

Note:

A contravention of this subsection is an offence: see subsection

1311(1).

(8) A vote cast in contravention of subsection (4) is taken not to have

been cast. This subsection has effect for the purposes of this Act

except subsections (4) and (7) and subsection 250BD(1), and

section 1311 and Schedule 3 so far as they relate to any of those

subsections.

Note:

This means the vote is not counted in working out a percentage of

votes cast or whether the resolution is passed, and does not affect the

validity of the resolution.

(9) For the purposes of this section, a vote is cast on behalf of a person

if, and only if, it is cast:

(a) as proxy for the person; or

(b) otherwise on behalf of the person; or

(i) power to vote; or

(ii) power to exercise, or control the exercise of, a right to

vote.

(10) Subject to Part 1.1A, subsections (4), (5), (6), (7), (8) and (9) have

effect despite:

(a) anything else in:

(i) this Act; or

(ii) any other law (including the general law) of a State or

Territory; and

(b) anything in the company's constitution.

13 At the end of Part 2G.2

Add:

Amendment of the Corporations Act 2001 Schedule 1

Remuneration Part 1

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 13

Division 9--Meetings arising from concerns about

remuneration reports

250U Application

This Division applies in relation to a listed company if:

(a) at an AGM (the later AGM) of the company, at least 25% of

the votes cast on a resolution that the remuneration report be

adopted were against adoption of the report; and

(b) at the immediately preceding AGM (the earlier AGM) of the

company, at least 25% of the votes cast on a resolution that

the remuneration report be adopted were against adoption of

the report; and

an earlier application of section 250V.

Note:

Subsection 250R(2) requires a resolution to adopt a remuneration

report for a listed company to be put to the vote at the company's

AGM.

250V Resolution to hold fresh elections for directors at special

meeting to be put to vote at AGM

(1) At the later AGM, there must be put to the vote a resolution (the

spill resolution) that:

(a) another meeting (the spill meeting) of the company's

members be held within 90 days; and

(b) all the company's directors who:

(i) were directors of the company when the resolution to

make the directors' report considered at the later AGM

was passed; and

(ii) are not a managing director of the company who may,

in accordance with the listing rules for a prescribed

financial market in whose official list the company is

included, continue to hold office indefinitely without

being re-elected to the office;

cease to hold office immediately before the end of the spill

meeting; and

immediately before the end of the spill meeting be put to the

vote at the spill meeting.

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Part 1 Remuneration

14 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

(2) Subsections 250R(4), (5), (6), (7), (8), (9) and (10), and other

provisions of this Act so far as they relate to any of those

subsections, apply in relation to the spill resolution in the same

way as they apply in relation to a resolution that a remuneration

report be adopted.

(3) To avoid doubt, section 203D does not apply in relation to the spill

resolution.

250W Consequences of spill resolution being passed

(1) This section applies if the spill resolution is passed.

Deadline for holding spill meeting

(2) The company must hold the spill meeting within 90 days after the

spill resolution was passed.

(3) Nothing in subsection (2) authorises any person to disregard:

(a) section 249HA (Amount of notice of meetings of listed

company); or

(b) if a person intends to move a resolution relating to the

appointment of a director of the company--any provision of

the company's constitution that requires a minimum period

of notice for such a resolution.

Note:

Division 3 (which includes section 249HA) deals with giving notice of

the spill meeting. Division 5 contains rules relevant to holding the

spill meeting.

If relevant directors cease to hold office before deadline

(4) The company need not hold the spill meeting within 90 days after

the spill resolution was passed if, before the end of that period,

none of the company's directors described in paragraph 250V(1)(b)

remain as directors of the company.

Consequences of failure to hold spill meeting in time

(5) If the company does not hold the spill meeting within 90 days after

the spill resolution was passed, each person who is a director of the

company at the end of those 90 days commits an offence.

Amendment of the Corporations Act 2001 Schedule 1

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Bill 2011 No. , 2011 15

Note:

A person who is a director at the end of those 90 days may commit an

offence even if he or she was not a director when the spill resolution

was passed.

(6) An offence against subsection (5) is an offence of strict liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

(7) Subsection (5) does not apply if the company need not hold the

spill meeting because of subsection (4).

Note:

A defendant bears an evidential burden in relation to the matter in

subsection (7): see subsection 13.3(3) of the Criminal Code.

(8) Subsection (5) does not apply to a person who was not a director of

the company at any time during the period:

(a) starting when the spill resolution was passed; and

(b) ending at the last time notice of the spill meeting could have

been given to hold the spill meeting within 90 days after the

spill resolution was passed and comply with section 249HA

(Amount of notice of meetings of listed company).

Note:

A defendant bears an evidential burden in relation to the matter in

subsection (8): see subsection 13.3(3) of the Criminal Code.

Cessation of relevant directors and commencement of

newly-appointed directors

(9) All the company's directors described in paragraph 250V(1)(b)

cease to hold office immediately before the end of the spill meeting

and the directors appointed by the meeting commence to hold

office at the end of that meeting. This subsection has effect despite

anything else in this Act and the company's constitution.

250X Ensuring there are at least 3 directors after spill meeting

(1) This section applies if there would be fewer than 3 directors of the

company immediately after the spill meeting apart from this

section.

Note:

Subsection 201A(2) requires the company to have at least 3 directors.

(2) Enough directors to ensure that the company has 3 directors

immediately after the spill meeting are taken to have been

appointed, by resolution passed at the spill meeting, from the

persons who:

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Part 1 Remuneration

16 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

(a) gave the company signed consents to act as directors of the

company in anticipation of being appointed by such a

resolution; and

(b) were not appointed as directors by such a resolution apart

from this section.

Note:

The number of directors taken under subsection (2) to have been

appointed is the difference between 3 and the number of directors

holding office immediately after the spill meeting apart from this

section.

(3) The persons taken to have been appointed are those with the

highest percentages of votes favouring their appointment cast at the

spill meeting on the resolution for their appointment (even if less

than half the votes cast on the resolution were in favour of their

appointment).

Example: Suppose that, under subsection (2), 2 directors are taken to have been

appointed, and the percentages of votes favouring appointment were

50% for Jean, 40% for Karl and 30% for Lionel. Jean and Karl would

both be taken to have been appointed directors, but Lionel would not.

(4) For the purposes of this section, if 2 or more persons have the same

percentage of votes favouring their appointment, the one of those

persons chosen by the director or directors who hold office apart

from this subsection is taken to have a higher percentage than the

rest of those persons.

Note:

A director who holds office apart from subsection (4) could make a

series of choices if 3 or more persons all have the same percentage of

votes favouring their appointment and it is necessary to work out

which 2 of those persons are taken to be appointed as directors.

(5) If a person is taken to have been appointed because of a choice

under subsection (4), the company must confirm the appointment

by resolution at the company's next AGM. If the appointment is

not confirmed, the person ceases to be a director of the company at

the end of the AGM.

(6) This section has effect despite anything else in this Act and the

company's constitution.

250Y Term of office of director reappointed at spill meeting

If a director who ceased to hold office immediately before the end

of the spill meeting is appointed as director by resolution passed at

Amendment of the Corporations Act 2001 Schedule 1

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Bill 2011 No. , 2011 17

the spill meeting, his or her term of office runs as if the cessation

and appointment had not happened.

Note:

This section is subject to subsection 250X(5).

14 Paragraph 300A(1)(a)

Repeal the paragraph, substitute:

(a) discussion of board policy for determining, or in relation to,

the nature and amount (or value, as appropriate) of

remuneration of the key management personnel for:

(i) the company, if consolidated financial statements are

not required; or

(ii) the consolidated entity, if consolidated financial

statements are required; and

15 Subparagraph 300A(1)(c)(i)

Omit "and", substitute "or".

16 Subparagraphs 300A(1)(c)(iii) and (iv)

Repeal the subparagraphs.

17 Paragraph 300A(1)(da)

Repeal the paragraph.

18 Paragraph 300A(1)(f)

Omit "regulations.", substitute "regulations; and".

19 After paragraph 300A(1)(f)

Insert:

(g)

if:

(i) at the company's most recent AGM, comments were

made on the remuneration report that was considered at

that AGM; and

(ii) when a resolution that the remuneration report for the

last financial year be adopted was put to the vote at the

company's most recent AGM, at least 25% of the votes

cast were against adoption of that report;

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Part 1 Remuneration

18 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

an explanation of the board's proposed action in response or,

if the board does not propose any action, the board's reasons

for inaction; and

(h) if a remuneration consultant made a remuneration

recommendation in relation to any of the key management

personnel for the company or, if consolidated financial

statements are required, for the consolidated entity, for the

financial year:

(i) the name of the consultant; and

(ii) a statement that the consultant made such a

recommendation; and

(iii) if the consultant provided any other kind of advice to

the company or entity for the financial year--a

statement that the consultant provided that other kind or

those other kinds of advice; and

(iv) the amount and nature of the consideration payable for

the remuneration recommendation; and

(v) the amount and nature of the consideration payable for

any other kind of advice referred to in

subparagraph (iii); and

(vi) information about the arrangements the company made

to ensure that the making of the remuneration

recommendation would be free from undue influence by

the member or members of the key management

personnel to whom the recommendation relates; and

(vii) a statement about whether the board is satisfied that the

remuneration recommendation was made free from

undue influence by the member or members of the key

management personnel to whom the recommendation

relates; and

(viii) if the board is satisfied that the remuneration

recommendation was made free from undue influence

by the member or members of the key management

personnel to whom the recommendation relates--the

board's reasons for being satisfied of this.

20 Subsection 300A(1)

Omit the second sentence.

21 Subsections 300A(1AAA) and (1B)

Amendment of the Corporations Act 2001 Schedule 1

Remuneration Part 1

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 19

Repeal the subsections.

22 Schedule 3 (after table item 49)

Insert:

49A

Subsections 206J(4), (6)

and (7)

60 penalty units.

49B

Subsection 206K(4)

60 penalty units.

49C

Subsections 206L(3) and

(4)

60 penalty units.

49D

Subsection 206M(2)

60 penalty units.

23 Schedule 3 (after table item 66)

Insert:

66A

Subsection 250BD(1)

200 penalty units or imprisonment for 5 years,

or both.

24 Schedule 3 (table item 68A) (the table item 68A inserted by

item 16 of Schedule 5 to the Corporate Law Economic

Reform Program (Audit Reform and Corporate

Disclosure) Act 2004)

Repeal the item.

25 Schedule 3 (before table item 68B)

Insert:

68AA Subsection 250R(2)

5 penalty units.

68AB Subsection

250R(7)

200

penalty units or imprisonment

for 5 years, or both.

26 Schedule 3 (after table item 70)

Insert:

70A

Subsection 250W(5)

10 penalty units.

Schedule 1 Amendment of the Corporations Act 2001

Part 2 Limits on number of directors

20 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

Part 2--Limits on number of directors

27 Section 9

Insert:

board limit means a limit described in section 201N.

28 Section 9

Insert:

board limit resolution means a resolution described in paragraph

201P(1)(a).

29 Before section 201A

Insert:

Subdivision A--General rules

30 At the end of Division 1 of Part 2D.3

Add:

Subdivision B--Limits on numbers of directors of public

companies

201N Application of Subdivision

(1) This Subdivision applies in relation to a public company if its

constitution allows its directors to set a limit (a board limit) whose

effect is to restrict the number of directors of the company to a

number less than the maximum number of directors specified in the

constitution.

Note:

This Subdivision applies however the constitution or board limit is

expressed.

(2) If a company's constitution provides that the maximum number of

directors is either a specified number or another number

determined by the directors:

(a) any number determined by the directors that is lower than the

specified number is a board limit; and

Amendment of the Corporations Act 2001 Schedule 1

Limits on number of directors Part 2

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 21

(b) any lowering by the directors of that lower number is also a

board limit.

(3) Subsection (2) does not limit, and is not limited by, subsection (1).

201P Directors must not set board limit unless proposed limit has

been approved by general meeting

(1) The directors must not set a board limit unless:

(a) a resolution (a board limit resolution) approving the proposal

to set the limit specified in the resolution has been passed by

a general meeting of the company; and

(b) the notice of the meeting set out an intention to propose the

board limit resolution and stated the resolution; and

resolution and meeting the requirements in section 201Q.

Note 1:

Subsection 249L(3) requires information in the notice of meeting to be

presented clearly, concisely and effectively.

Note 2:

Section 201U specifies the consequences of a contravention of

subsection (1) of this section. Also, section 1324 provides for

injunctions to enforce subsection (1) of this section.

(2) A board limit resolution has effect until immediately before the

start of the first AGM of the company after the general meeting by

which the resolution was passed.

(3) A board limit resolution does not prevent the appointment of a

person as a director of the company by the other directors of the

company between general meetings of the company.

(4) However, if a person is appointed by the other directors as a

director of the company while a board limit resolution has effect,

the company must confirm the appointment by resolution at the

company's next AGM. If the appointment is not confirmed, the

person ceases to be a director of the company at the end of the

AGM.

(5) Subsections (1), (2) and (4) have effect despite the company's

constitution.

Note:

Although subsection (4) is like subsection 201H(3) in many ways, it is

not a replaceable rule like subsection 201H(3).

Schedule 1 Amendment of the Corporations Act 2001

Part 2 Limits on number of directors

22 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

201Q Requirements for explanatory statement to members

The statement accompanying the notice of a general meeting

stating an intention to propose the board limit resolution must be in

writing and set out clearly, concisely and effectively:

(a) the directors' reasons for proposing the board limit

resolution; and

(b) all other information that:

(i) is reasonably required by members in order to decide

whether or not it is in the company's interests to pass

the proposed board limit resolution; and

(ii) is known to the company or to any of its directors.

Note:

Section 1309 creates offences where false and misleading material

relating to a corporation's affairs is made available or furnished to

members.

201R Records of voting on board limit resolution if poll demanded

(1) This section applies if a poll is duly demanded on the question that

the board limit resolution be passed.

(2) For each member of the company who votes on the poll in person,

the company must record in writing:

(a) the member's name; and

(b) how many votes the member casts for the resolution and how

many against.

Note:

Failure to comply with this subsection is an offence: see subsection

1311(1).

(3) For each member of the company who votes on the poll by proxy,

or by a representative authorised under section 250D, the company

must record in writing:

(a) the member's name; and

(b) in relation to each person who votes as proxy, or as such a

representative, for the member:

(i) the person's name; and

(ii) how many votes the person casts on the resolution as

proxy, or as such a representative, for the member; and

(iii) how many of those votes the person casts for the

resolution and how many against.

Amendment of the Corporations Act 2001 Schedule 1

Limits on number of directors Part 2

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 23

Note:

Failure to comply with this subsection is an offence: see subsection

1311(1).

201S Notice of resolution to be lodged

The company must lodge a notice setting out the text of the board

limit resolution within 14 days after the resolution is passed.

201T Declaration by court of substantial compliance

(1) The Court may declare that a requirement set by section 201Q,

201R or 201S has been satisfied if the Court finds that it has been

substantially satisfied.

(2) A declaration may be made only on the application of an interested

person.

201U Consequences of setting board limit in breach of section 201P

Application

(1) This section applies if the directors of the company set a board

limit in contravention of subsection 201P(1).

Board limit etc. ineffective

(2) The board limit and anything done in reliance on it have no effect

for the purposes of:

(a) the company's constitution; or

(b) this Act, except this section.

Note:

If a board limit resolution is not passed, the number of directors of a

company that can be appointed (for example by a general meeting)

depends on the maximum number of directors specified by the

company's constitution. This is so even if the directors purport to set a

board limit despite the fact the board limit resolution was not passed.

(3)

If:

(a) one or more directors are appointed by one or more

resolutions passed at a particular general meeting of the

company; and

(b) because of the board limit, the general meeting was not given

the opportunity to pass one or more resolutions appointing a

number of directors such that the number of directors of the

Schedule 1 Amendment of the Corporations Act 2001

Part 2 Limits on number of directors

24 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

company would (if those resolutions had been passed) have

exceeded the board limit;

every appointment of director made by a resolution passed at the

general meeting is invalid.

Note:

This subsection does not apply if a shortage of persons consenting to

be appointed director was the reason the general meeting was not

given the opportunity to pass one or more resolutions appointing a

number of directors such that the number of directors of the company

would (if those resolutions had been passed) have exceeded the board

limit.

(4) Subsections (2) and (3) have effect despite anything else in the

company's constitution or in this Act, except sections 128, 129 and

201M.

Note:

Sections 128 and 129 deal with assumptions a person dealing with the

company may make, including assumptions about the due

appointment of directors. Section 201M deals with effectiveness of

acts by a director in circumstances where the director's appointment is

invalid for certain reasons.

Company and candidates for directors may seek compensation

(5) Subsection (6) applies if either of the following (the suffering

party) suffers loss or damage because of the setting of the board

limit in contravention of subsection 201P(1):

(a)

the

company;

(b) a person for whom both the following conditions are met:

(i) the person had given the company a written indication

that he or she would be a candidate to be appointed

director at a general meeting;

(ii) because of the board limit, the general meeting was not

given the opportunity to consider passing a resolution to

appoint the person as director.

(6) The suffering party may institute a proceeding in the Court for the

contravention.

Note:

Section 1325 deals with the orders the Court may make to compensate

the suffering party for the loss.

Contravention does not give rise to an offence

(7) A person is not guilty of an offence because of the contravention.

Schedule 1 Amendment of the Corporations Act 2001

Part 3 Voting by proxies as directed

26 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

Part 3--Voting by proxies as directed

33 Subsections 250A(4), (5) and (5A)

Repeal the subsections.

34 After section 250BA

Insert:

250BB Proxy vote if appointment specifies way to vote

(1) An appointment of a proxy may specify the way the proxy is to

vote on a particular resolution. If it does:

(a) the proxy need not vote on a show of hands, but if the proxy

does so, the proxy must vote that way; and

(b) if the proxy has 2 or more appointments that specify different

ways to vote on the resolution--the proxy must not vote on a

show of hands; and

is voted on--the proxy must vote on a poll, and must vote

that way; and

(d) if the proxy is not the chair--the proxy need not vote on the

poll, but if the proxy does so, the proxy must vote that way.

If a proxy is also a member, this subsection does not affect the way

that the person can cast any votes they hold as a member.

Note:

A company's constitution may provide that a proxy is not entitled to

vote on a show of hands (see subsection 249Y(2)).

(2) If the chair contravenes subsection (1), the chair commits an

offence if the appointment as a proxy resulted from:

(a) the company sending to members:

(i) a list of persons willing to act as proxies; or

(ii) a proxy appointment form holding the chair out as being

willing to act as a proxy; or

(b) the operation of section 250BC.

(3) If a person other than the chair contravenes paragraph (1)(a) or (d),

the person commits an offence if the person:

(a) agreed to the appointment; or

Amendment of the Corporations Act 2001 Schedule 1

Voting by proxies as directed Part 3

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 27

(b) held himself or herself out, or caused another person to hold

him or her out, as being willing to act as a proxy in relation to

the appointment.

(4) If a person other than the chair contravenes paragraph (1)(b), the

person commits an offence if, in relation to at least 2 of the

different ways of voting specified by the appointments, the person:

(a) agreed to at least one of the appointments specifying that way

of voting; or

(b) held himself or herself out, or caused another person to hold

him or her out, as being willing to act as a proxy in relation to

at least one of the appointments specifying that way of

voting.

(5) An offence against subsection (2), (3) or (4) is an offence of strict

liability.

Note:

For strict liability, see section 6.1 of the Criminal Code.

250BC Transfer of non-chair proxy to chair in certain

circumstances

If:

(a) an appointment of a proxy specifies the way the proxy is to

vote on a particular resolution at a meeting of the company's

members; and

(b) the appointed proxy is not the chair of the meeting; and

the resolution be passed; and

(d) either of the following apply:

(i) if a record of attendance is made for the meeting--the

proxy is not recorded as attending;

(ii) the proxy does not vote on the resolution;

the chair of the meeting is taken, before voting on the resolution

closes, to have been appointed as the proxy for the purposes of

voting on the resolution at that meeting.

35 Section 250H (note)

Omit "250A(4)", substitute "250BB(1)".

36 Schedule 3 (table item 66)

Amendment of the Corporations Act 2001 Schedule 1

Application provisions Part 4

Corporations Amendment (Improving Accountability on Director and Executive Remuneration)

Bill 2011 No. , 2011 29

Part 4--Application provisions

37 At the end of Chapter 10

Add:

Part 10.17--Transitional provisions relating to the

Corporations Amendment (Improving

Accountability on Director and Executive

Remuneration) Act 2011

1517 Application of Subdivision B of Division 1 of Part 2D.3

Subdivision B of Division 1 of Part 2D.3 applies in relation to the

setting of board limits on or after 1 July 2011.

1518 Application of sections 206J, 206K, 206L and 206M

(1) Section 206J applies to entry into arrangements on or after 1 July

2011, whether the remuneration was for services rendered before,

on or after that day.

(2) Section 206K applies to contracts entered into on or after 1 July

2011.

(3) Sections 206L and 206M apply to recommendations made under

contracts entered into on or after 1 July 2011.

1519 Application of subsection 249L(2)

Subsection 249L(2) as substituted by the Corporations Amendment

(Improving Accountability on Director and Executive

Remuneration) Act 2011 applies in relation to AGMs held on or

after 1 July 2011.

1520 Application of section 250BB

Section 250BB applies to voting on or after 1 July 2011, whether

the proxy was appointed before, on or after that day.

Schedule 1 Amendment of the Corporations Act 2001

Part 4 Application provisions

30 Corporations Amendment (Improving Accountability on Director and Executive

Remuneration) Bill 2011 No. , 2011

1521 Application of section 250BC

Section 250BC applies to appointments of proxies made on or after

1 July 2011.

1522 Application of section 250BD

Section 250BD applies in relation to voting on or after 1 July 2011,

whether the matter that is the subject of the resolution relates to a

time before, on or after that day.

1523 Application of subsections 250R(4) to (10)

Subsections 250R(4), (5), (6), (7), (8), (9) and (10) apply in

relation to voting on or after 1 July 2011, whether the remuneration

report concerned relates to a financial year starting before, on or

after that day.

1524 Application of Division 9 of Part 2G.2

Division 9 of Part 2G.2 applies in relation to AGMs held on or

after 1 July 2011.

Note:

This has the effect that the Division can apply in relation to a company

only if both of its 2 most recent AGMs have been held on or after

1 July 2011.

1525 Application of amendments of section 300A

(1) The amendments of section 300A made by the Corporations

Amendment (Improving Accountability on Director and Executive

Remuneration) Act 2011 apply in relation to remuneration reports

for financial years starting on or after 1 July 2011.

(2) Subsection (1) does not apply to the repeal of subsection

300A(1AAA).

Saving of regulations made for paragraph 300A(1)(f)

(3) The amendment of paragraph 300A(1)(f) made by the

Corporations Amendment (Improving Accountability on Director

and Executive Remuneration) Act 2011 does not affect the validity

of any regulations in force for the purposes of that paragraph

immediately before that amendment.

Commonwealth of Australia Bills

CORPORATIONS AMENDMENT (IMPROVING ACCOUNTABILITY ON DIRECTOR AND EXECUTIVE REMUNERATION) BILL 2011