Two-strikes rule on listed-company remuneration report (s 250R)
If a remuneration report attracts 25%+ no votes twice running, a spill resolution must be considered.
Who must comply
Listed companies (included in an official list of a declared financial market, such as ASX), their directors and the chair of the AGM, and key management personnel and their closely related parties in casting votes.
What triggers it
Holding an AGM as a listed company; a second consecutive vote of 25% or more against adoption of the remuneration report triggers the spill resolution.
When due
At each AGM; after a second strike, the spill resolution is put at that AGM, and if it passes the spill meeting must be held within 90 days, subject to the 28-day notice period for listed company meetings (s 249HA). The company must still have at least 3 directors after the spill meeting (s 250X).
Evidence required
Notice of meeting informing members of the remuneration report resolution (s 249L(2)(a)); proxy forms and voting records showing key management personnel exclusions; AGM minutes recording questions on the report; poll results; where a spill resolution passes, notice of and minutes for the spill meeting and signed director consents.
Max penalty
A key management personnel member, or closely related party, whose vote is cast in breach of s 250R(4) commits an offence (s 250R(7)), and the vote is disregarded. If a passed spill resolution is not followed by a spill meeting within 90 days, each director at the end of that period commits a strict liability offence (s 250W(5))
Who must comply with this? The applicability test by industry, business structure and size.
Summary
At every listed company's AGM a resolution that the remuneration report be adopted must be put to the vote (Corporations Act 2001 s 250R(2)). The vote is advisory and does not bind the directors, and key management personnel named in the report and their closely related parties must not vote on it except as directed proxies (s 250R(4)-(5)). The chair must give members a reasonable opportunity to ask questions about, or comment on, the report (s 250SA). If at least 25% of votes cast are against adoption at two consecutive AGMs (the 'two strikes'), and no spill resolution was put at the earlier AGM, a spill resolution must be put at the later AGM (ss 250U-250V). If it passes, a spill meeting must be held within 90 days, at which the directors in office when the directors' report was approved (other than a managing director who may hold office indefinitely under the listing rules) cease to hold office and their positions are put to election (s 250W).
Enforced by
Source legislation
Entity types
Topics
Related
- CWLTHFAR deferred remuneration arrangements (40% deferral 4 years)FAR accountable persons must have 40% of variable remuneration deferred 4 years.
- CWLTHMaintain insider trading policy + share trading window (listed entities)ASX Listing Rule 12.12 requires written policy on directors + senior managers trading entity securities.
- CWLTHApply 'if not why not' against ASX Corporate Governance Council Principles & Recommendations (4th ed)ASX-listed entities must disclose against 8 Principles + 38 Recommendations annually.
- CWLTHASX-listed entity board independence + composition (CGC Principle 2)ASX entities should have majority-independent boards + clear board charter.
Frequently asked questions
- Who must comply with Two-strikes rule on listed-company remuneration report (s 250R)?
- Listed companies (included in an official list of a declared financial market, such as ASX), their directors and the chair of the AGM, and key management personnel and their closely related parties in casting votes.
- What triggers Two-strikes rule on listed-company remuneration report (s 250R)?
- Holding an AGM as a listed company; a second consecutive vote of 25% or more against adoption of the remuneration report triggers the spill resolution.
- When is Two-strikes rule on listed-company remuneration report (s 250R) due?
- At each AGM; after a second strike, the spill resolution is put at that AGM, and if it passes the spill meeting must be held within 90 days, subject to the 28-day notice period for listed company meetings (s 249HA). The company must still have at least 3 directors after the spill meeting (s 250X).
- What is the maximum penalty for Two-strikes rule on listed-company remuneration report (s 250R)?
- A key management personnel member, or closely related party, whose vote is cast in breach of s 250R(4) commits an offence (s 250R(7)), and the vote is disregarded. If a passed spill resolution is not followed by a spill meeting within 90 days, each director at the end of that period commits a strict liability offence (s 250W(5))
- What evidence is required for Two-strikes rule on listed-company remuneration report (s 250R)?
- Notice of meeting informing members of the remuneration report resolution (s 249L(2)(a)); proxy forms and voting records showing key management personnel exclusions; AGM minutes recording questions on the report; poll results; where a spill resolution passes, notice of and minutes for the spill meeting and signed director consents.
Source: https://www.legislation.gov.au/C2004A00818/latest/text. Rules Mate is not a law firm. Always verify against the live regulator source before acting.