United States: Update To ASX Guidance Note 9 – Disclosure Of Corporate Governance Practices

Last Updated: September 5 2019
Article by Kym Livesley and Urvashi Seomangal

ASX has amended ASX Listing Rules Guidance Note 9 Disclosure of Corporate Governance Practices (GN9), which is due to become effective on 1 January 2020 (the same date as the fourth edition of the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council (Principles and Recommendations) comes into effect). Through the changes to GN9, the ASX encourages boards to take a proactive approach to disclosure and to implement dynamic corporate governance procedures in order to ensure that the board is accountable to securityholders in relation to corporate culture.

The amendments to GN9 make it clear that the board must ensure that the market receives a reasonable level of information about the corporate governance practices that an entity has adopted. The corporate governance statement should not merely state the corporate governance arrangements that the entity has in place, but should also explain how the corporate governance arrangements are practically being implemented by the board.

The key change to GN9 is that it now explicitly sets out recommendations for what entities should disclose in their annual report, including:

  • A board charter setting out the respective roles and responsibilities of board and management.
  • A board skills matrix setting out the current skill set of the board or is looking to achieve in its board membership. 
  • Identifying the independent directors.
  • If a director has an interest, position or relationship described in Box 2.3 of the Principles and Recommendations but the board forms the view that it does not compromise the independence of that director, the board should disclose the nature of the interest, position or relationship in question and an explanation of why the board has formed that view that it does not compromise the independence of that director.
  • The length of service of each director.
  • The entity's corporate values.
  • A whistleblower policy. 
  • An anti-bribery and corruption policy.
  • A diversity policy that sets out the measurable gender diversity objectives that the board or committee has set and its progress towards achieving those objectives.
  • If a director does not speak the language which the board or security holder meetings are held or key documents are written, disclosure of the processes that are in place to ensure that the director understands the proceedings and documents and can contribute to discussions at those meetings and understands and can discharge their obligations in relation to those documents.

The amendments to GN9 also provide:

  • Additional guidance for completing an Appendix 4G (Key Disclosures Corporate Governance Council Principles and Recommendations) in section 9 of GN9. Importantly, an entity should only check a box in the second column of Appendix 4G if it has followed the relevant recommendation in full and for the whole of the reporting period. Otherwise, the entity should check the box in the third column of Appendix 4G.
  • Detailed guidance on how to properly disclose governance policies in section 10 of GN9, in particular, clarifying that 'disclose' means to include the information in full in the entity's annual report, or on its website.
  • Guidance on the Principle and Recommendation 1.5 in section 11 of GN9 relating to a diversity policy and measurable targets, stating that if the entity is in the S&P/ASX300 Index the measurable objective for achieving gender diversity in the composition of the board is not less than 30% of its directors of each gender – noting that the 30% figure is a minimum. 
  • Guidance on Principle and Recommendation 4.3 in section 14 of GN9, relating to the verification of periodic reports that are not audited or reviewed by an external auditor.
  • Guidance on Principle and Recommendation 5.3 in section 15 of GN9, expecting entities to release a copy of the presentation materials that it intends to give a new and substantive investor or analyst presentation on the ASX Market Announcements Platform ahead of the presentation.
  • Guidance on Principle and Recommendation 8.3 in section 17 of GN9, which requires a listed entity that has an equity-based remuneration scheme to have a policy on whether participants are permitted to enter into transactions which limit the economic risks of participating in the scheme and disclose the policy.

The following table sets out when the fourth edition of the Principles and Recommendations will commence:

Entity Type Financial year that GN9 will come into effect
Entities with 31 December financial reporting dates Financial year ending 31 December 2020
Entities with 30 June financial reporting date Financial year ending 30 June 2021
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