Comprehensive overhaul of Companies Act needed — WehbySunday, October 24, 2021
In his contribution to the debate on the amendments to the Companies Act for the facilitation of hybrid annual general meetings, Senator Don Wehby also called for a comprehensive overhaul of the piece of legislation.
Senator Wehby , in comments made to the Senate on Friday October 22, 2021, stated, “These amendments are a reminder that we need a robust legislative mechanism in place to respond in an agile manner.”
“Mr President, 2004 was the last time we did a comprehensive review of the Companies Act. That was 17 years ago, so I support the Hon Minister Shaw that there will be a next phase of amendments to the Act to strengthen efficiency in relation to the incorporation of companies, administration of company meetings and proceedings, and deterrents against companies being used for money laundering and other illicit activities,” Wehby told the senate on Friday.
Wehby, who is also Group CEO of conglomerate GraceKennedy Limited, advocated a change in the reading of the auditor's report at annual general meetings (AGMs).
Changes, he outlined, were required to meet new business requirements and to ensure the country maintains best practices in good governance which are constantly changing in response to the social, legal, economic and regulatory climate.
Wehby drew the example of public companies overseas that are required to include a discussion of environmental, social and corporate governance (ESG) in their annual reports.
ESG criteria are a set of standards for a company's operations that socially conscious investors use to screen potential investments.
Wehby stated, “Investors are increasingly applying these non-financial factors as part of their analysis process to identify a company's material risks and growth opportunities.”
The company head said that there is one issue that has surfaced that ought to be considered in the next round of amendments to the legislation relating to section 157(2) of the Act, which requires the auditor's report to be read at a company's general meeting.
He commented, “A new set of international financial reporting standards were published by the International Accounting Standards Board in 2017. As a result of this, changes in requirements affecting the auditor's report have expanded materially, with the result being that the report is significantly longer.
Five years or so ago the audit report was a page or two, and now it is in the range of nine pages.
He stated that, as an accountant by profession, he believed that, in the interest of transparency and accountability, shareholders should have the information available for them to ask informed questions.
However, he said, “We can find a middle ground where we create efficiency in the administration of the meeting while ensuring shareholders rights are not negatively impacted.”
He was suggesting, he outlined, the adoption of the UK approach to the reading of the auditor's report. That approach allows the auditor's report to be treated in the same way that the financial statements are currently treated.
This means it would be laid before the members at the meeting, and taken as read, bearing in mind that those reports would have been previously published by companies in their annual reports.
Alternatively, Wehby said, legislation could allow a summarised or abridged version of the report to be read which would highlight key information.
“This approach would make more time available to discuss other governance issues and the future of the company,” he said.