Corporations Amendment (Accountability on Termination Payments) Bill

On 7 September 2009, the Senate Economics Legislation Committee released its Final report the Rudd Governments Corporations Amendment (Improving Accountability on Termination Payments) Bill 2009 (Bill) aimed at reducing excessive executive termination benefits.

The current provisions of the Corporations Act 2001 (Cth) (Act) allows for termination benefits of up to 7 times a Director’s total annual remuneration package before shareholder approval is required. Additionally, only company directors’ termination benefits are subject to shareholder approval. If the bill is passed, this will be dramatically reduced.

extend the scope of the termination provisions to executives including the the key management personnel and the five mostly highly remunerated officers (if different) of the entity (that is, the officers named in the remuneration report), namely a person holding ‘managerial or executive office;

repeal the definition of benefit as as previously defined in s9 of the act and insert a new broader definition into section 200AB that describes a benefit as including a payment or other valuable consideration, any kind of real or personal property, any legal or equitable estate or interest in real or personal property, or any legal or equitable right. To avoid any future ambiguity relating to what amounts to a benefit that requires shareholder approval, the Bill provides for a regulation making power to create regulations which prescribe things to either be a benefit, or not to be a benefit;