The Corporations amendments
The Corporations Amendments (Improving Accountability of Termination Payments) Act 2009 commenced on 24 November 2009 with the aim of discouraging excessive termination benefits being paid to outgoing executives.
The Act makes significant changes to the termination payment provisions of the Corporations Act 2001 including:
- lowering the threshold at which shareholder approval is required for executive payments in relation to retirement or loss of office – this has been reduced from up to 7 times total annual remuneration to one year’s base salary;
- expanding the range of senior employees affected by the termination provisions – as well as directors (and de facto directors) the regime will apply to senior executives and key management personnel named in the Remuneration Report or who have in the last 3 years been named in the Remuneration Report. (The range of personnel for non disclosing entities within the meaning of the Corporations Law remains largely unaffected.);
- clarifying and expanding the range of benefits that will be considered to be part of a "termination benefit" when considering whether shareholder approval is required;
- requiring authorised termination benefits to be repaid immediately and increasing penalties for unauthorised termination benefits.
Employment arrangements entered into after 24 November will be affected by the new provisions. Whilst the provisions will not apply retrospectively, employment arrangements that are renewed or materially varied after 24 November will be caught by the new regime.