Recently, the Corporations Act was amended to place voting restrictions on key management personnel and their closely related parties in relation to remuneration-related matters at general meetings, including the remuneration report resolution. We reported these HERE. 

Unfortunately, the Bill as passed by Australia’s parliament has drafting flaws (see HERE).

The 2 strikes law should have allowed, in certain circumstances, the Chairman of an AGM (who is otherwise subject to the restrictions) to vote undirected proxies on remuneration-related matters generally. But the way the law was drafted means that this exception does not apply to the resolution to adopt the remuneration report. The inability of the Chairman of an AGM – who is often the recipient of shareholder proxies, either directly or by default – to vote undirected proxies on the remuneration report resolution could have a material impact on the outcome of voting on the resolution, increasing the chance of the ‘two strikes’ regime being invoked.

With AGMs looming, the government hastily inserted drafting corrections into a larger bill dealing with consumer credit to correct the issue. The Consumer Credit and Corporations Legislation Amendment (Enhancements) Bill 2011 was introduced into the House of Representatives on 22 September 2011.

In anticipation that the law will be in place by their AGM, several company Notices of Meeting have been issued with wording on proxy voting to expressly comply with the wording in the new Bill.

But the government strategy may have backfired. Putting the amendments in the consumer credit Bill is likely to mean the corrections will not be made in time for many companies’ AGMs. This is because the Bill has been referred to both the Parliamentary Joint Committee on Corporations and Financial Services and the Senate Economics Committee for inquiry.

Are you turning blue yet?

The explanatory notes for the Bill can be found HERE (but skip the 1st 98 pages of the 100 page set of notes to get to the 2 strikes bit!),  while the draft Bill can be found HERE (but again we suggest you save time by skipping to the last of the 102 pages to see how it is done) 

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