The New Legislation

For Australian listed companies the recently introduced new Legislation now means that online annual reporting is the default option for delivering information to shareholders. There is no need to produce a printed annual report, unless specifically requested by a shareholder.

What does this mean for listed companies? – How can they save costs? – When does this come into effect?

Parliament passed the Corporations Legislation Amendment (Simpler Regulatory System) Bill on 21 June 2007. The Bill was then given Royal Assent, making it effective from 28 June 2007. This means companies wishing to take advantage of it can do so as soon as they have obtained shareholder preferences.

Key aspects of the new Legislation

The Simpler Regulatory System Bill was released mid 2007 in Australia. The new Legislation allows companies, should they choose, to make annual reports only available on their websites. No longer will they have to supply printed annual reports to shareholders, unless they specifically request them.

Presently shareholders must ‘opt out’ if they no longer wish to receive a printed report and rely on access to an online report on the company’s website. Now online is the default and they will have to ‘opt in’ if they wish to receive a printed copy.

By moving shareholders to access annual reporting information online, the changes open up new opportunities for companies to review the way they communicate with shareholders, embrace new production efficiencies and benefit from significant cost reductions, while reducing the impact on the environment.

Company secretaries and investor relations managers are keen to understand the full ramifications of the changes, the options available, how their own company can benefit and how they need to inform shareholders who are presently quite oblivious to the changes – a desire to be better informed and therefore better prepared.

Annual report producers must not lose sight of the fact that the annual report not only provides information, but also plays an important role in positioning the company in the minds of its audiences. It can be a barometer to signal changes and new direction, support brand strategy and attributes and provide a positive perception of company strengths and wellbeing. It should not be lightly dismissed.

Why have the changes happened?

Key influencers of legislative change that are prompting governments around the world to enact legislation to abolish the compulsory production of printed annual reports are:

> the high cost to companies of printing and distributing
> accelerating acceptance of the Internet and related technologies
> annual reporting legislation and regulation has become increasingly burdensome in recent years
> shareholder feedback suggesting that much content is unintelligible
> increasing concerns over the environment
> making the most of technology to deliver results earlier and to a global audience

The Internet has become a viable information source for many Australians, supported by statistics such as:

> 14,663,622 Internet users in Australia in 2006 – representing 70.7 percent of the population Nielsen (NetRatings, ITU, Computer Industry Almanac)

> of the 4.7 million households with home Internet access in 2005-06, 48 percent had broadband Internet access. Australian Bureau of Statistics (Household Use of Information Technology, Australia, 2005-06)

> 77 percent of shareholders have email and internet access Chartered Secretaries Australia, Tim Sheehy letter to AFR 20 Oct 2006

> in 2005 70 percent of large companies provided webcasts of their AGMs Chartered Secretaries Australia, Benchmarking Governance in Practice in Australia 2006

What has happened in other countries?

USA August - 2006
The SEC approved the elimination of the requirement for companies to distribute printed copies of annual reports to shareholders. Companies can make the report available on a corporate website or by a link to it. The website must state that a printed copy of the annual report is available upon request and free of charge.

UK January - 2007
Electronic communications provisions in The Companies Bill 2006 eliminate the requirement for companies to distribute printed copies of annual reports to shareholders. Now companies assume that shareholders do not wish to receive a printed version unless they request one. Since 2000 shareholders could opt out of receiving printed annual reports and could request an electronic version.

Originally planned for end 2008, the Government has fast-tracked the provisions to come into effect earlier. It intends to introduce the electronic shareholder communications aspects of the Companies Bill in January 2007. Companies need to amend their Articles of Association in order to take advantage of the new provisions. Those that have already amended them as a result of the earlier Electronic Communications Act 2000 may not have to amend them again. It is anticipated that most companies will take advantage of these provisions by the end of 2007.

New Zealand - November 2006
The Section 209B of the Companies Act provides for electronic delivery of annual reports. Companies have the choice of sending out a printed annual report or a notice stating:

‘that the shareholder has the right to receive a copy of the annual report free of charge within 15 days of the notice if they request it from the company: and that the shareholder can obtain a copy of the annual report by electronic means, and how such a copy can be obtained.’

Once the notice has been distributed, shareholders can then request a printed version.

A round of applause for these four countries. How long will it take other countries to realise the good sense in adopting this online approach. A determined effort will save millions of trees and help us breathe more easily with a clearer conscience.

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