Australia - New ASX Corporate Governance Principles And Recommendations Require Public Disclosure Of Whistleblower And Anti-bribery Policies.
Legal News & Analysis - Asia Pacific - Australia - Regulatory & Compliance
1 November, 2019
Recommendations effective from 1 January 2020
What you need to know
- The fourth edition of the ASX Corporate Governance Principles and Recommendations (ASX Guidelines) require that listed entities have, and publically disclose, whistleblower and anti-bribery policies.
- An entity who does not follow these recommendations must set out the reasons for not doing so in a corporate governance statement, or else be in breach of the ASX Listing Rules.
- This edition of the ASX Guidelines takes effect for an entity's first full financial year commencing on or after 1 January 2020.
What you need to do
- Listed entities should prepare, or review existing, whistleblower and anti-bribery policies to ensure they are robust and appropriate to publically disclose.
- For listed entities with a financial year ending 31 December 2020, these policies should be made publically available from 1 January 2020, either in their 2019 annual report, or on their website.
The fourth edition of the ASX Guidelines will come into force for financial years commencing on or after 1 January 2020, and includes new recommendations in relation to whistleblower and anti-bribery policies. A copy of the full ASX Guidelines can be found here.
Recommendations 3.3 and 3.4
The new ASX Guidelines require that listed entities have and disclose a whistleblower policy (recommendation 3.3) and an anti-bribery policy (recommendation 3.4), and that the board or a committee of the board is informed of any material incidents reported under those policies.
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth), which took effect from 1 July 2019, requires large proprietary and public companies to have compliant whistleblower policies in place. For more information on the new laws, see our recent publication here. The ASX Guidelines however, now require listed companies to also have an anti-bribery policy, and publically disclose both policies in their annual report or on their website.
The commentary to the recommendations provides specific suggestions as to the content of each policy:
- A whistleblower policy may: (a) identify and explain the types of concerns to be reported under the policy, how and to whom those reports can be made and the process of investigation following reports, (b) explain the protections afforded to whistleblowers, and (c) provide for training of employees about their rights and obligations under the policy, and also for persons who may receive reports on how to respond.
- An anti-bribery policy may: (a) state the prohibitions against the giving of bribes to public officials and payment of secret commissions to those acting in an agency or fiduciary capacity, and include appropriate controls around political donations or the offering of gifts, (b) acknowledge the serious criminal and civil penalties and reputational damage that may be suffered as a result of engaging in bribery or corruption, (c) provide for training to managers and employees on how to recognise and deal with bribery or corruption, and (d) require breaches of the policy to be reported to the appropriate person or body within the entity.
For more practical steps in relation to developing and implementing whistleblower and anti-bribery policies and practices, see our previous publication here.
These recommendations form part of the substantially redrafted Principle 3 of the ASX Guidelines, which seeks to instil a culture of acting lawfully, ethically and responsibly within listed entities. In the aftermath of the Financial Services and Banking Royal Commission, these recommendations are seen as fundamental to addressing identified governance and conduct issues and rebuilding corporate trust.
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 (besides personal or confidential information which may be redacted) in the entity's annual report or on the entity's website.
Compliance with the ASX Guidelines
The ASX Listing Rule 4.10.3 requires listed entities to include a corporate governance statement in their annual report (or a link to the corporate governance statement on their website), which discloses the extent to which an entity has followed the ASX Guidelines. An entity who has failed to follow a recommendation in the ASX Guidelines for any part of the reporting period, must include an "if not, why not" explanation in their corporate governance statement setting out the reasons for not following a recommendation. The statement must also specify the date at which it is current and the fact it has been approved by the board of the entity. A failure to publish a corporate governance statement will constitute a breach of the ASX Listing Rules. While the ASX has discretion as to whether to take action in response to a breach of the ASX Listing Rules (Rule 18.6), in serious circumstances a breach may result in the ASX suspending the entity's trading in securities (Rule 17.3.1).
The need to publically declare failures to develop and disclose these policies poses significant reputational risk to listed entities. The likelihood of reputational harm following such admissions is heightened by the increasing profile of bribery, corruption and whistleblowing issues. Meanwhile, in the context of general corporate distrust following the Royal Commission, the disclosure of whistleblower and anti-bribery policies provides listed entities with an opportunity to reassure investors of their commitment to meeting current cultural and regulatory expectations.
Effective date for the fourth edition of the ASX Guidelines
Given the effective date of the ASX Guidelines, it is important to remember that that listed entities with a financial year ending 31 December will be expected to measure their governance practices against the recommendations in the fourth edition from 1 January 2020.
Therefore, listed entities should now be taking steps to prepare, or review existing, whistleblower and anti-bribery policies to ensure they are appropriate to publically disclose.
Aside from the new ASX Guidelines, it is important that all companies have robust whistleblower and anti-bribery policies in order to reduce the risk of misconduct by individuals acting on behalf of a company, and the risk of the company or its directors being held liable for such misconduct.
For further information, please contact:
James Clarke, Partner, Ashurst