Above Board: Board Advisory and Governance Update – Summer 2025/6

The Commonwealth’s amendments to the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act), which passed Parliament on 28 November, substantially increase the maximum penalties for breaches of Part 3 or 12A or s 142(1) of the legislation. Part 3 deals with requirements for environmental approvals and subsection 142(1) deals with contravening a condition attached to an approval of the taking of an action. Part 12A deals with bioregional planning.

The EPBC Act will now include a new civil penalty formula modelled on the Corporations Act 2001 (Cth) and Australian Securities and Investments Commission Act 2001 (Cth). The formula is different for individuals and corporations, and if a Court can determine either or both of the benefit derived and the detriment avoided because of the contravention. For an individual who contravenes a civil penalty provision, the maximum penalty is the greater of 5,000 penalty units (currently $1.65 million), three times the benefit derived or detriment avoided, or if both can be determined, three times their sum. 

For corporate defendants, the maximum penalty is the greatest of 50,000 penalty units (currently $16.5 million), three times the benefit or detriment or both, and 10per cent of annual turnover up to a maximum of 2.5 million penalty units (currently $825 million). 

Like other Commonwealth Acts, the EPBC Act includes a section imposing accessorial liability on anyone involved in a contravention of a civil penalty provision. Corporate officers need to be careful not to be caught up in corporate wrongdoing. Following the High Court’s judgment in the 2024 Productivity Partners case, which we wrote about in an earlier insight article, accessorial liability can arise if the alleged accessory has knowledge of the essential circumstances, matters or facts that constitute the primary contravention. The accessory need not know that the primary contravener’s conduct amounted to a contravention of the law, or the consequences that result from the primary contravener’s conduct.

For almost two decades, formulating corporate governance principles and recommendations for ASX listed entities was the job of the ASX Corporate Governance Council. The Council’s members included representatives of business, shareholder, industry and professional groups. Their principles, developed over four editions between 2003 and 2019, are used by ASX-listed entities who report against them on an ‘if not, why not’ basis. However, the Council was disbanded in October 2025 after it failed to agree on proposed revisions to the existing ASX Corporate Governance Principles and Recommendations (4th Edition released on 27 February 2019).

Following a review by a review panel appointed by ASX, ASX announced that it was assuming ‘ultimate responsibility’ for developing, approving and issuing the principles. It is currently putting together a new Advisory Group on Corporate Governance, chaired by former Governor of the Reserve Bank of Australia Phillip Lowe, to assist it in developing the new approach.

Also in October, ASX commenced a public consultation on whether it should amend the Listing Rules to require shareholder approval for dilutive acquisitions and changes in admission status. This is a further response to institutional investors’ concerns over the acquisition by James Hardie Industries plc of The Azek Company Inc. We talked about the James Hardie matter in our spring Above Board,  in the context of disclosing Listing Rule waivers. The consultation closes on 15 December 2025. 

There are four proposals up for discussion. Proposals one and two potentially affect the 130 entities that are currently dual-listed. The first is that a dual-listed company should seek shareholder approval if it wants to change its admission status from a full Listing to an ASX Foreign Exempt Listing. This is significant because most of the Listing Rules, including some which confer important shareholder rights and protections, no longer apply if the company’s admission status changes. 

The second is that a dual-listed company should seek shareholder approval before delisting from ASX, but only if it is ‘home-grown’ in the sense of being first listed on ASX. If it was first listed overseas, and it will maintain a foreign listing, the approval requirement would not apply.

The third and fourth proposals are broader. The third is to require shareholder approval for the issue of shares by a listed acquirer as part of a takeover or merger, if it will dilute the existing equity capital by more than 25per cent. ASX is minded to apply the rule only to larger entities in the S&P/ASX300 index.

ASX is broadly supportive of these proposals. It has also asked for the market’s view on whether the threshold for shareholder approval for significant changes to the nature or scale of a listed entity’s activities – required under Chapter 11 of the Listing Rules – should be lowered, but it has not put forward a specific view at this time. 

ASIC’s work on the dynamics of public and private markets continued, with the release in November of its Report 823: Advancing Australia’s evolving capital markets: Discussion paper response. The Report responds to the ASIC consultation we discussed in autumn Above Board. Like many others, we are pleased to see ASIC taking a forward-looking, evidence-based approach to its capital markets work and hope it continues.

ASIC discusses some ideas for reinvigorating public markets, but the extent to which it factors within ASIC’s control affect the global trends of fewer initial public offerings (IPOs) and more delisting is debatable. For the IPO market, there are disincentives in both the process of listing and in being listed. 

On the first, ASIC has already commenced its fast-track IPO timetable trial, which helps on deal risk. ASIC is also looking at revising its guidance on sell-side research, prospectus disclosure, pre-offer publicity, and forecasts (presumably with the intention of making it a less expensive and difficult task). They are also encouraging market operators to look at the free float requirements, which may assist smaller founder-controlled businesses. 

Addressing the ongoing disincentives to being listed are more complicated, because they would involve a bigger change in regulatory policy. ASIC is encouraging government to think about “tailored, potentially lighter disclosure and governance frameworks” for the smaller end of the market (this is significant because ASX20 makes up half the current market cap, so there is a long tail in Australia). There may be benefits in considering a ‘smaller market cap’ or SMC category like that recently adopted in Europe in looking at the application of regulatory and legal rules. 

Lower regulatory exposure would make listing more attractive (all other things being equal). Reducing the burden of poorly designed or poorly targeted regulation will require a systematic and principled approach to regulatory reform that balances the cost of regulation with the need for market integrity and transparency.  

ASIC’s Report 823: Advancing Australia’s evolving capital markets: Discussion paper response and the supporting documents released with it also deal with concerning practices in the private credit markets. The report picks up on a number of themes discussed earlier in Pamela Hanrahan’s article on private credit in Company Director magazine. 

ASIC identifies concerns with transparency (investment information and reporting), marketing and distribution practices, fee structures, conflicts of interest, governance, valuation practices, liquidity risk management, and credit risk management. It sets out some principles for fund managers to address these issues and says that ‘The private credit fund sector should use these principles as a benchmark to urgently assess its current practices, lifting them where necessary.’

Throughout 2025, APRA has been consulting on proposed updates to its governance prudential standards. In October, it announced some preliminary adjustments to its proposals based on stakeholder feedback – these included lifting directors’ tenure limits from 10 to 12 years, and removing the proposals that designated significant financial institutions consult with APRA before making board appointments. It has also indicated it will not proceed with the proposal that boards of banks and insurers include at least two independent directors (including the chair) that are not members of any other board within the group.

APRA has also refined its proposals in relation to individual director skills, perceived conflicts, and registers of relevant interests and duties.

Consultation on the formal changes to the governance standards will begin in Q2 of 2026. 

The Mayne Pharma scheme of arrangement has been well-publicised, including the deterioration in Mayne’s business after signing the implementation agreement and the resulting efforts by the bidder, Cosette, to get out of the deal. That has resulted in complex proceedings before the Supreme Court of New South Wales, an application to the Takeovers Panel, and a dramatic ending with a rare prohibition order under the Foreign Acquisitions and Takeovers Act. 

There are many lessons for dealmakers arising from the transaction, but one aspect will be significant for boards more generally. By Cosette performing its obligations under the implementation agreement, and otherwise working with Mayne to progress the transaction while Cosette decided whether to terminate, Cosette gave up that very right to terminate. This was not a case of waiver, but of ‘election’ – a similar but legally distinct concept that may be immune from being contracted out of. 

The doctrine of election can come up in any contract, not just in M&A. The Supreme Court’s decision in Mayne illustrates the lengths to which parties may need to go to ensure that they do not inadvertently forgo their rights to terminate a contract, arguably even through actions they take before the termination rights even arise. 

Read more in our article, ‘The sleeper issue in the Mayne Pharma scheme’. 

The new Aged Care Act 2024 (Cth) commenced on 1 November 2025. The Act takes a rights-based approach, requiring providers to take all reasonable and proportionate steps to act in a manner compatible with rights that include quality and safe care, and independence, autonomy, empowerment and freedom of choice.

The new regime includes a ‘due diligence’ obligation on directors and other responsible persons, similar to work health and safety laws. The duty requires directors to exercise due diligence to ensure the aged care provider complies with its cornerstone duty to ensure, so far as is reasonably practicable, that its conduct does not cause adverse effects to the health and safety of clients. Due diligence includes taking reasonable steps to maintain knowledge of the providers’ regulatory requirements, understand the nature of the aged care services delivered by the provider and potential adverse effects on clients when delivering those services, ensure the provider has appropriate resources and processes to manage adverse effects to the health and safety of clients, ensure the provider has appropriate processes for receiving, reviewing and responding to information regarding incidents and risks in a timely way, and ensure the provider has processes for complying with any duty or requirement under the Act.

It is worth observing that the Productivity Commission’s interim report on the care economy – covering health care, early childhood education and care, disability support, aged care, veterans’ care and other community services – recommended bringing their different regulatory frameworks into greater alignment. It proposed that the Government ‘pursue greater alignment in quality and safety regulation across care sectors, including developing a standardised safety and quality reporting framework and data repository, and introducing a single set of practice and quality standards for aged care and National Disability Insurance Scheme services.’

The care economy includes a mix of government, private and not-for-profit providers and is one of the largest sectors of the Australian economy, representing 8per cent of Australia’s GDP, and an estimated 12per cent of the workforce. We think the new Aged Care laws may provide a model for the governance of providers across all these services. 

In spring Above Board, we discussed the Productivity Commission’s report on creating a more dynamic and resilient economy dealing with regulation and its impact on business dynamism.

In January 2024, a major Australian Law Reform Commission report on corporations and financial services law found that Australia’s existing corporations and financial services legislation ‘is a tangled mess – difficult to navigate, costly to comply with, and unnecessarily difficult to enforce’. In July 2025, the Productivity Commission said that our regulatory system hinders business dynamism. In November 2025, a report commissioned by the Australian Institute of Company Directors concluded that the cost of complying with Commonwealth regulation has doubled over the last decade to $160 billion and the amount of board time spent on compliance has risen from 24per cent to 55per cent. 

More than 100 days on from the Treasurer’s Economic Reform Roundtable, we are yet to see any meaningful commitment to tackling the problem of poor-quality regulation. This will require attention to both stock (fixing existing laws) and flow (improving the discipline with which new laws are made). 

The task is so large it can only be accomplished with the active engagement of experts. The Corporate Law Reform Alliance recently wrote to the Treasury Ministers recommending that he establish an independent expert body to tackle the job of improving the law, modelled on the former Corporations and Markets Advisory Committee (CAMAC). CAMAC was a research-based body of independent experts focused on continuous reform of corporate law that existed (in different forms) between 1978 and 2014. It was abolished against the advice of experts and despite strong opposition from Labor. 

We expect the Productivity Commission to provide its recommendations to Government in December and will keep you posted.