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Revised Principles and Revised Guidance to Principle 7

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Companies Update
30 June 2008
Update no 06/08

Important information for ASX Listed Entities

ASX Corporate Governance Council releases Revised Supplementary Guidance to Principle 7

In response to feedback from listed entities, members of the ASX Corporate Governance Council (Council) and others, the Council has released Revised Supplementary Guidance to Principle 7 (Revised Guidance). The Revised Guidance should be read in conjunction with Principle 7 of the Council's Corporate Governance Principles and Recommendations (Revised Principles) 2nd Edition August 2007. 

A number of respondents to Council's public consultation, particularly smaller entities, supported the need for additional guidance to Principle 7 in view of Council's major changes to that Principle.

Council has reworked the Revised Guidance to assist entities seeking to develop appropriate risk management and to report in relation to Principle 7. The Revised Guidance is also designed to assist entities wanting to 'early adopt' in relation to the 2nd Edition of the Revised Principles for the purpose of their annual reports for the 30 June 2008 year end.

Revised Guidance - Key changes

The key changes are:

  • A reminder that:
  • When entities consider the issue of material business risks, they need to be aware of their obligations under ASX Listing Rule 3.1 to make an announcement to the market in relation to some or all their material business risks and/or changes to those risks, where the risk or change is likely to have a material impact on the price or value of a company's securities and that Boards will need to exercise their judgement when considering whether disclosure is required.
  • Entities should also be aware of their obligations under Section 299A of the Corporations Act to include in the directors' report, information required to make an informed assessment of companies' operations, financial position, business strategies and prospects for future financial years.
  • The 'Frequently Asked Questions' in the Revised Guidance have been re-ordered to create a more 'user friendly' format and the answers to some of the questions have been enhanced so as to provide more assistance to entities.
  • The terminology in the Revised Guidance has been amended to align with the terminology in Principle 7.
  • The Revised Guidance includes additional discussion about the reports Boards may receive from the CEO/CFO under Recommendation 7.3 and issues to consider.
  • The hypothetical examples of helpful and unhelpful disclosure have been amplified. These examples are provided solely to provide guidance on the appropriate level and depth of explanation - not for their content. Council would be concerned should any entity simply copy these examples.
  • Some of the ideas incorporated in the section on 'risk profile' in the August 2007 version have been incorporated into the discussion of risk oversight and management policies.
  • The Revised Guidance does not use the term 'best practice' which was removed from the Revised Principles.

Reporting in relation to the Revised Principles

Those entities that choose to 'early adopt' and report against the Revised Principles in their annual reports for the year ending 30 June 2008 are reminded of the need to clearly indicate to which edition of the Corporate Governance Principles their corporate governance statement relates. Entities may choose to provide a statement that contains separate sections on each edition of the Corporate Governance Principles in the one annual report.

In order to assist listed entities and others to implement and interpret the Revised Principles, ASX is involved in a number of educational seminars and awareness raising programs nationwide. 

The Revised Principles and the Revised Guidance to Principle 7 are available on the ASX website. 

To help keep our Listed Entities informed of information and events ASX will be sending emails to the Company Secretary's Office from time to time. You are receiving this email because you have been identified as a key contact within the Company Secretary's Office at your organisation. If you would like to update your email address please do so via the Directors/Senior Management page on ASX Online for Companies. Feel free to forward this email to any relevant parties within your organisation.