New regulations taking effect tomorrow will reduce the need for listed companies to distribute notices in relation to their annual reports.
Alternative annual report requirements
Regulations 61B-61F of the Financial Markets Conduct Regulations 2014 (the regulations) will take effect on 9 August 2017. Any NZX listed company may comply with this regime from 9 August 2017, but can elect not to comply for accounting periods ending on or before 31 December 2017. NZX companies that have already complied with section 209 this year do not need to do anything more this calendar year.
In summary, the new regulations will:
- exempt "FMC reporting entities" from complying with sections 209 to 209B of the Companies Act 1993, which set out their current obligation to provide the annual report, or notice of the annual report, to shareholders on an annual basis, and
- require listed companies to advise each shareholder using a "section 209C" notice for a single time that the annual report is available by electronic means (or in hard copy by request to the company).
Chapman Tripp comments
What does this mean for you?
NZX listed companies will no longer need to advise shareholders in writing each year that their annual report is available online or in hard copy by request. Instead NZX listed companies must send out a section 209C notice to all shareholders on a single occasion and then ensure any new shareholder who joins the register after that notice is sent receives a statement to the same effect in their new investor pack.
Can companies with a 30 June balance date use the regime for 2017 reports?
As the changes take effect tomorrow, listed companies with 30 June or later balance dates in 2017 can take advantage of these new regulations for their 2017 annual reports. This can be achieved as follows:
- once their 2017 annual report is available, the company should send all existing shareholders a section 209C notice stating that the annual report is, or will be, available by electronic means (or in hard copy by request to the company)
- the share registrar should be asked to update the company's new investor packs with a statement to the same effect as the section 209C notice so that this is sent to any new shareholders acquiring shares after the company has issued a section 209C notice to all shareholders for the first time, and
- the section 209C notice and revised new investor pack should be released to NZX under Listing Rule 10.6.2.
What happens to shareholders who have previously requested hard copy reports?
Sending out a section 209C notice will 'reset' past elections made by shareholders to receive the annual report in hard copy. Companies must send out hard copies of the annual report to a shareholder who requests one as soon as practicable after receiving the request.
If a hard copy annual report is requested by a shareholder after receipt of a new investor pack, the listed company must, as soon as practicable, distribute a hard copy of its latest annual report and any future annual reports until the person ceases to become a shareholder or revokes their hard copy election.
What should companies who have already distributed their 2017 annual report do?
NZX companies that have already complied with section 209 this year do not need to do anything more this calendar year. NZX is expected to release a ruling shortly that will recognise the new notice process and extend it to the half year reports that are required to be prepared under the NZX Listing Rules. However, listed companies who have already distributed their 2017 annual report should send out their first section 209C notice when their 2018 annual report is available for distribution and follow the process outlined above to avoid a need to resend hard copies of the 2017 annual report.
Is there anything else you need to know?
Listed companies will be required by the new regulations to maintain a website on which their annual reports are available for at least five years, and the most recent annual report must be prominently displayed on the site.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.