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Understanding the 5th Edition of the ASX Corporate Governance Principles and Recommendations.

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By this time next year, the ASX Corporate Governance Council will have completed the Fifth Edition of its Corporate Governance Principles and Recommendations, which is likely to be in effect in time for the 2025-26 financial year.

The Recommendations, as they’re known, set out recommended corporate governance practices for entities listed on the ASX that are likely to achieve good governance outcomes and meet the reasonable expectations of most investors. They’re not mandatory: if a Board considers a Council recommendation inappropriate in a particular circumstance, it is entitled not to adopt it, but it must explain why it has not adopted the Recommendation. This is known as the “if not, why not” approach.

From the council’s recent Consultation Draft, we know the new edition follows the Fourth Edition’s (February 2019) existing structure, including the eight core Principles:

  1. Lay solid foundations for management and oversight
  2. Structure the board to be effective and add value
  3. Instil a culture of acting lawfully, ethically and responsibly
  4. Safeguard the integrity of corporate reports
  5. Make timely and balanced disclosure
  6. Respect the rights of security holders
  7. Recognise and manage risk
  8. Remunerate fairly and responsibly

But the Fifth Edition contemplates new and amended Recommendations and commentary. There are now 33 recommendations, down slightly from the Fourth Edition’s 35, and 7 additional recommendations targeted at foreign entities. Some Recommendations that duplicate or overlap existing provisions will be removed.

So why update the recommendations now? In general terms, the aim is to highlight corporate accountability and purpose in line with business and community expectations of transparency in governance. This will be achieved by boosting listed company disclosure around issues like diversity and inclusion, corporate conduct, culture, risk management and stakeholder relationships.

There is a clear emphasis on stakeholder engagement and robust material risk management. Although climate and sustainability risk and reporting are not explicitly addressed (which may have amounted to another duplication of legal provisions), the consultation draft aims to align with upcoming adjustments to climate and sustainability reporting standards.

So, we should all expect to be busier on the disclosure front next year and into the future. By the time it is published, the 5th Edition will likely exceed 60 pages. What does all this mean for our clients right now? It is time to start planning for a thorough revision of policies and processes to meet the higher disclosure standards that we’re likely to encounter from next year.

If you would like to know more, or need help with preparing for these changes, please contact Acclime Australia on +61 3 8689 9997 or via email: infoaustralia@acclime.com.

Understanding the 5th Edition of the ASX Corporate Governance Principles and Recommendations

About Acclime.

Acclime helps established multinational companies and startups start and operate their business in Australia and the APAC region. By seamlessly navigating our clients through the complexities of Australian laws and bureaucracy, we allow them to reclaim valuable time and fully focus on growing and developing their business.