The Government has welcomed the passage of the Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 through the Senate.
The Government particularly welcomes the dropping of an amendment that would have had the effect of torpedoing the Government's new regulatory regime on termination payments in three years time.
"These reforms will empower shareholders to reject excessive termination payments and promote responsible remuneration practices," Mr Bowen said
"They are a major change to laws left by the previous government, where termination payments could reach up to seven times a director's total annual remuneration package before shareholder approval was required.
"Commonsense has also prevailed with the dropping of an unworkable amendment that would have led to significant unintended consequences, including creating serious uncertainty for Australian companies trying to comply with the law."
Key features of the legislative package include:
- The new regulatory framework will ensure that termination benefits for company directors and executives exceeding one year's average base salary are subject to shareholder approval.
- The scope of the requirements relating to termination benefits is expanded to include senior executives or key management personnel of a disclosing entity.
- The definition of what constitutes a "benefit" is broadened, including a requirement for a broad interpretation of the term "benefit" and a requirement that the substance should prevail over its legal form.
- New regulation-making powers to specify what types of payments are, or are not, a termination benefit, and to define 'base salary'.
- The immediate repayment of unauthorised termination benefits with an increase in the penalty provisions.
- The retention of the existing requirement for the giving of the benefit to be approved by a resolution passed at a general meeting.
The legislation and accompanying regulations will take effect the day after Royal Assent is granted.
16 November 2009