Related party rules tightened

A CRACK down on related party disclosure documents has been launched by the Australian Securities and Investments Commission to ensure shareholders receive sufficient information to make a decision about whether to grant related party benefits.

Related party benefits are where a public company provides a financial benefit to a person or group that are not ‘at arms length’ from the company.

ASIC executive director policy and markets regulation Malcolm Rodgers said the commission’s review of related party documents showed companies were not providing sufficient information to shareholders.

"ASIC has previously warned about the common defects found in related party documents but the documents lodged with ASIC continue to include these defects," he said.

"As part of our new campaign we will be issuing a comment letter to the company whenever our review of related party documents reveals one or more of the common defects that we have identified as common concerns."

The company is then required to circulate ASIC’s comment letter to shareholders with the related party documents.

However, as soon as ASIC detects one of the common defects the company will be given the opportunity to withdraw the document. The company will then need to re-lodge amended documents if it wishes to hold the proposed shareholders meeting.

The commission will no longer allow companies to amend documents after it has detected defects.