The ASX has revised Listing Rule 10.17 and introduced new Listing Rules 10.17A and 10.17B to clarify the rules relating to the payment of “directors’ fees”, with effect from 1 July 2014.

 

While there has been no change to the basic requirement of Listing Rule 10.17 that an entity must not increase the total aggregate amount of directors’ fees payable to all of its non-executive directors without the approval of holders of its ordinary securities, there has been a change as to what should be counted in the fee pool.

 

 “Directors’ fees” now expressly include:

 

·         superannuation contributions for the benefit of a non-executive director;

·         any fees which a non-executive director agrees to sacrifice for other benefits (directors’ fees sacrificed to pay for the purchase of securities in the entity must come out of the fee pool approved by security holders); and

·         all fees payable by the entity or any of its child entities to a non-executive director for acting as a director of the entity or any child entity, including attending and participating in any board committee meetings (but not the directors’ fees paid to a non-executive director of a child entity who is not also a director of the entity).

 

The reimbursement of genuine out-of-pocket expenses, genuine “special exertion” fees paid in accordance with the entity’s constitution, or securities issued to a non-executive director with the approval of the holders of the entity’s ordinary securities under Listing Rule 10.11 or 10.14 are excluded from the definition of “directors’ fees” for the purposes of Rule 10.17.

 

Note that ASX does not regard acting as a director of a child entity or attending and participating in normal board committee meetings (such as an audit, nomination, remuneration or risk committee) of the entity or a child entity as a “special exertion” by a director and therefore the fees paid by an entity or any of its child entities to a non-executive director for such services must come out of the total amount of directors’ fees approved by the holders of its ordinary securities under Rule 10.17.

 

Listing Rule 10.17A now specifically provides that the total amount of directors’ fees paid to the directors of an entity by the entity or any of its child entities must not exceed the total amount of directors’ fees approved by the holders of its ordinary securities under Rule 10.17.

 

Rules 10.17 and 10.17A do not apply to the remuneration of an executive director, but Listing Rule 10.17B provides that an executive director’s remuneration must not include a commission on, or percentage of, operating revenue.

 

Some companies that may have deferred a request for shareholder approval of a fee pool increase to maintain a safe level of headroom for contingencies may want to reconsider and bring forward the request to this season.

 

The ASX Listing Rules, including Chapter 10 and Rules 10.17, 10.17A and 10.17B, can be viewed HERE.

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