24 May, 2019
Reforms and enforcement activity escalating in 2019
What you need to know
- New Commonwealth whistleblower laws have been passed and take effect from 1 July 2019. These laws introduce significant reforms, including a broader range of protected disclosures and remedies available to whistleblowers in the corporate, financial and credit sectors, and a requirement that public and large proprietary companies have a whistleblower policy.
- The ASX Corporate Governance Council has recommended that listed entities have and publicly disclose a whistleblower policy (which should comply with the new whistleblower legislation) and an anti-bribery and corruption policy.
- The upcoming federal election has raised the profile of political donations laws and the proposed establishment of a Commonwealth Integrity Commission.
- The Australian Law Reform Commission has been asked to conduct a review of Australia's corporate criminal responsibility regime to evaluate the efficacy of the current regime and identify reform options to strengthen and simplify the legislation.
What you need to do
- Companies should prepare or review their whistleblower and anti-bribery policies, to ensure they are compliant with new whistleblower laws and are appropriate for public disclosure.
- Keep an eye out for new proposals regarding the establishment of a national integrity commission and amendments to political donations laws.
So far this year, there has been growing pressure on the Australian Government to address bribery and corruption, largely as a result of Commissioner Hayne's findings in the high-profile Financial Services Royal Commission and the lead up to the upcoming federal election.
With the introduction of new whistleblower laws, announcement of further inquiries, and plans to establish a national anti-corruption watchdog, it is now more important than ever that companies take appropriate action to ensure they have effective anti-bribery policies and procedures in place, and that employees are aware of their legal obligations.
ASX Corporate Governance Council recommends disclosure of policies
In the 4th edition of the ASX Corporate Governance Principles and Recommendations released on 27 February 2019 (ASX Guidelines), the ASX Corporate Governance Council recommended that listed entities have and disclose, in their annual report or on their website, a whistleblower policy and an anti-bribery and corruption policy, and ensure that the board or a committee of the board is informed of any material incidents reported under those policies. A copy of the full ASX Guidelines can be found here.
These recommendations fall under Principle 3 of the ASX Guidelines, which seeks to instil a culture of acting lawfully, ethically and responsibly, which is particularly important in light of the findings arising out of the Financial Services Royal Commission. The inclusion of these recommendations highlights the importance being placed on entities not only having whistleblower and anti-bribery and corruption policies, but also ensuring that they are effectively implemented within the business, including by keeping the board well-informed and taking steps to appropriately deal with any breaches.
The new ASX Guidelines will take effect for an entity's first full financial year from 1 January 2020. As such, listed entities should start preparing or reviewing their whistleblower and anti-bribery policies, bearing in mind that these should be disclosed in full in the entity's annual report or on the entity's website. The ASX Guidelines set out suggestions for the content of these policies. Listed entities should also ensure there is a mechanism in place through which material breaches of the policies can be appropriately reported to and dealt with by the board.
The release of the ASX Guidelines coincides with the passing of new Commonwealth whistleblower legislation (which is discussed in further detail below). Relevantly, the new legislation mandates that listed and large proprietary companies must have compliant whistleblower policies in place by 1 January 2020. As such, before disclosing whistleblower policies in annual reports and/or on websites, listed entities should also ensure they are compliant with the requirements set out in the new legislation.
While compliance with the ASX Guidelines is not mandatory, ASX Listing Rule 4.10.3 requires listed entities to publicly disclose a corporate governance statement which sets out the extent to which the entity has followed the recommendations set by the ASX Corporate Governance Council.
Whistleblower reforms
New whistleblower laws are now in place, with the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth) (Whistleblower Act) being passed on 19 February 2019. These new laws provide for a consolidated and strengthened whistleblower protection regime for the corporate, financial and credit sectors, and introduce a number of significant reforms.
Most of the provisions set out in the Whistleblower Act will take effect from 1 July 2019. Under the Whistleblower Act, a disclosure will qualify for protection if the following requirements are met:
- the disclosure is made by an "eligible whistleblower", which is defined to include current or former officers, employees, contractors and individual associates of the entity, or its current or former relatives or dependents;
- the disclosure is made to the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA), a prescribed Commonwealth authority, or an "eligible recipient" such as an officer, senior manager, auditor or person authorised by the entity to receive disclosures; and
- the whistleblower has reasonable grounds to suspect misconduct or an improper state of affairs or circumstances.
The Whistleblower Act also provides whistleblowers with increased protections and a broader range of remedies. As such, it is important that companies are aware of their obligations under these laws. For more information on the new laws, see our recent publication here.
Notably, the Whistleblower Act requires public and large proprietary companies (which are defined as companies that have at least $25 million consolidated revenue per financial year, $12.5 million in assets or 50 employees) to have a compliant whistleblower policy in place no later than 1 January 2020. In order to be compliant, the policy must include certain information, including information about the protections available to whistleblowers, the persons to whom disclosures may be made and how they can be made, how the company will support whistleblowers, investigate disclosures and ensure fair treatment of employees who are mentioned in protected disclosures, and how the policy will be made available to officers and employees of the company.
It is clear that ensuring appropriate whistleblower processes are in place to protect whistleblowers is an area of focus for the Government. It is important that businesses familiarise themselves with their obligations under the new laws, implement policies which comply with the new laws, and take steps to educate staff about the legislative regime and whistleblower policies that are in place. In this regard, companies may wish to consider providing workplace training to employees and officers. Companies should also ensure that policies are regularly reviewed so that they are kept up-to-date and effective.
Challenges for the establishment of a federal anti-corruption watchdog
Over the course of 2018, there was a significant push from various groups (including Transparency International Australia) to establish a federal anti-corruption watchdog. This culminated in the Government announcing on 13 December 2018 that it would establish a Commonwealth Integrity Commission (CIC).
Despite a consultation paper released by the Government in December 2018 about the proposed model for the CIC, and three bills providing for various forms of a CIC and associated parliamentary standards, having been tabled in Parliament around the same time, there are still significant obstacles that need to be addressed before a national integrity commission can be established.
Most recently, the Senate Legal and Constitutional Affairs Legislation Committee (the Committee) recommended in its report published on 5 April 2019 that none of the three bills should be passed. The Committee expressed a number of concerns, including that the bills provided for expansive powers which might facilitate unjustified damage to a person's reputation without due process.
Transparency International Australia has also released a draft report on Australia's national integrity system, which provides a blueprint for reform. It recommends that a national integrity commission should have powers to coordinate with its state counterparts and an expanded remit to target violations with significant potential to corrupt. The proposed scheme goes beyond any proposals put forward by the Government or the Opposition at this stage.
Although there is still work to be done, it is expected that a federal integrity commission will be established in some form in the near future. The Government has recently committed $104.5 million over four years to establishing a national integrity commission in its 2019 budget, although progress must now await the outcome of the federal election on 18 May 2019.
To avoid duplication of roles and ensure coordination with existing agencies, the newly elected federal government will need to take into account the significant activities of the state and territory anti-corruption bodies. This will be particularly so in light of the growing jurisdiction of these bodies, such as the establishment of the new ACT Integrity Commission which will commence operation from 1 July 2019, and the recent launch of a parliamentary inquiry into anti-corruption measures in South Australia (which will include a review of the functions and resources of the Independent Commissioner Against Corruption).
ALRC to undertake review of corporate criminal responsibility regime
The recent publicity surrounding the Financial Services Royal Commission has heightened the Government's focus on the effectiveness of corporate crime legislation and enforcement. In this context, the Australian Law Reform Commission (ALRC) has been asked to conduct a review of Australia's corporate criminal responsibility regime to evaluate the efficacy of the current regime and identify reform options to strengthen and simplify the legislation.
The Attorney-General has said that a key task for the ALRC will be to consider whether the Commonwealth Criminal Code requires amendments to enable senior corporate officers to more readily be held liable for the misconduct of corporations. In undertaking the review, the ALRC is required to take into account the issues identified and recommendations made by Commissioner Hayne in his report coming out of the Financial Services Royal Commission, as well as the 2017 report of the ASIC Enforcement Review Taskforce.
The ALRC's final report is expected to be delivered to the Government by 30 April 2020.
Spotlight on political donations
Political donations laws have emerged as a hot topic in the lead up to the federal election. Following the release of federal political donation information for the 2017-18 period in February 2019, concerns were reignited regarding the appropriateness of federal disclosure limitations.
Late last year, the Coalition and Labour parties united to block proposed amendments to the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018,which would have required the disclosure of any donations above $1,000 (in line with the disclosure limitation in many states including Victoria and New South Wales).
Under the current laws, donations to federal political parties only need to be disclosed if they exceed a value of $13,800.
There have also been some recent court decisions concerning political donation laws. In particular, a landmark case was recently heard before the full bench of the High Court regarding the Queensland government's ban on political donations from property developers, which was enacted in May 2018 and retrospectively affected donations from October 2017 onwards. Although reasons have not yet been published, the High Court has made orders upholding the law banning political donations from property developers.
This has been reported as a significant set-back for the Coalition ahead of the federal election.
For further information, please contact:
James Clarke, Partner, Ashurst
james.clarke@ashurst.com
