The Government has released for consultation draft legislation, which contains the next tranche of reforms to improve disclosure of executive remuneration.
Importantly, the draft legislation also seeks to clarify the operation of the dividends test under the Corporations Act. In particular, the Government has sought to address stakeholder concerns by incorporating a solvency-based dividends test.
The Draft Bill proposes to amend the Corporations Act for payment of dividends (the dividends test) to:
- allow companies to either declare or pay a dividend;
- link the dividends test to company solvency; and
- allow non-reporting entities to calculate assets and liabilities with reference to financial records when applying the dividends test.
The proposed changes would repeal the current dividends test in s 254T and replace it with a dividends test that allows companies to:
- either declare or determine a dividend, consistent with Corporations Act dividend provisions and company practice; and
- calculate assets and liabilities based on existing reporting requirements.
The application of the dividends test would depend upon whether companies elect to declare a dividend or pay a dividend. Where a company declares a dividend, the dividends test would apply immediately before declaration. Where a company determines and later pays a dividend without declaring it first, the dividends test would apply immediately before payment. The proposed new dividends test would also require directors to reasonably believe the company will be solvent, immediately after the dividend is declared or paid.
COMMENTS are due by 15 March 2013.
Source: Parliamentary Secretary to the Treasurer’s media release No 055, 14 December 2012
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