The Australian Corporations Act is long overdue for reform to take into account the impact of new technologies, according to a report.
The Governance Institute and LexisNexis issued a white paper earlier this year calling for the reform of the Corporations Act. They described the legislation as a “19th century regulatory model”, better suited to the pre-digital world.
The white paper was also distributed at the 2017 Governance Institute National Conference, which began in Melbourne yesterday, to an audience of legal professionals and corporate governance experts.
Drawing on a roundtable discussion and survey conducted earlier in the year by LexisNexis and the Governance Institute, the report called for the law to be reformed to make it “technology-neutral”.
Many participants indicated frustration with the rules around shareholder communications and corporate reporting, feeling that the legislation had not kept up with advances such as mobile technology.
A technology-neutral act would remain relevant and applicable despite rapid technological change, and would allow for “innovation and shareholder engagement in corporate reporting”, according to the report.
Two-thirds of survey respondents said there should be a wholesale review of the Corporations Act, while the other third felt this was unnecessary.
“There was general agreement that the Corporations Act is way behind in terms of what shareholders and communities expect, particularly with respect to annual reporting, the AGM, financial reporting and annual reporting reform,” the report said.
“However, there was concern that a wholesale review of the act could cause wide-ranging unintended consequences like voting exclusions on remuneration resolutions, which are confusing and inconsistent, making it more complex to comply with the act.”
Some roundtable participants also indicated a lack of faith in the government to deliver technology-neutral law reform. One said the government may not “walk the talk” when it comes to encouraging innovation.
“I was participating in a discussion with Treasury on a technology-neutral corporations law, drafting amendments to the Corporations Act and changes to the notice of meeting,” the participant said.
“Everyone around the table laboured with Treasury’s inability to understand just what it was we were trying to achieve with this and what our suggestions were, which seemed eminently reasonable.”
Other issues identified with the act included the “piecemeal amendments” that have been added to it over the years, its complexity and the inconsistent liabilities and defences it imposes.
The report concluded that in the current uncertain political climate, a wholesale review of the act is unlikely. Participants instead suggested a piece-by-piece approach to reform, beginning with key issues such as technology neutrality.
“Participants agreed that the current act is unwieldy and we need a legislative regime which is simpler, easier to understand and more relevant in terms of its treatment of technology, communication and shareholder engagement,” the report said.
“There was also recognition that a wholesale or major review of the current Corporations Act is not – nor likely to become – a priority for the current government. From a process point of view, it was considered that it would be better to take a ‘modernisation’ approach.
“That would entail picking out one or two of the bigger themes … as the ‘spearhead’ for the process, in much the same way the CLERP [Corporations Law Economic Reform Program] reforms were implemented.”