House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Minister for Financial Services, Superannuation, Corporate Law and Human Services, the Hon Chris Bowen

Chapter 5 - Extending section 299A of the Corporations Act

Context of amendments

5.1 Under section 299A of the Corporations Act, a listed public company is required to provide, in its director's report, all information reasonably required to allow an informed assessment of its operations, financial conditional and business strategies and prospects for future financial years. Guidance on this requirement refers to it as a review of operations and financial condition.

5.2 The requirement for companies to disclose a review of operations and financial condition was introduced as a result of the recommendations of the HIH Royal Commission. The rationale for its introduction was to address a lack of contextual information which explained the results set out in a company's financial statements. Accordingly, the review of operations and financial condition was introduced to provide stakeholders with an overview which would enable users to understand a business' performance and the factors underlying its results and financial position.

5.3 Extending the application of section 299A to all listed entities was a recommendation of the Corporations and Markets Advisory Committee (CAMAC)'s 2006 report The social responsibility of corporations.

Summary of new law

5.4 All listed entities, that is both listed registered schemes and listed companies will be required to report under section 299A.

Comparison of key features of new law and current law

Detailed explanation of new law

5.5 The Bill amends subsection 299A(1) and paragraph 299A(2)(a) to provide that listed registered schemes, in addition to listed companies, are required to disclose the information that members would reasonably require to make an informed assessment of the operations, financial position and business strategies and prospects for future financial years of the entity reported on . [Schedule 1, Part 1, items 24 and 27]

5.6 The Bill amends paragraphs 299A(1)(b)(c) to make the phrasing consistent with that which is used paragraph 299A(1)(a) and subsection 299A(2) with respect to using the term 'entity reported on' rather than the term entity . [Schedule 1, Part 1, items 25 and 26]

5.7 The Bill amends subsection 299(3) to provide that listed registered schemes, in addition to listed companies, may omit material that would otherwise need to be disclosed under paragraph 299A(1)(c) if it is likely to result in unreasonable prejudice to the listed registered scheme or listed company or if consolidated financial statements are required, the consolidated entity or entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity . [Schedule 1, Part 1, item 28]