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ARTICLE · 30 AUGUST 2010

Related Party Transactions At The AGM

Clayton Utz
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Related party benefits must generally be approved by shareholders of public companies unless they constitute reasonable remuneration or are on arm's-length terms. There is no bright line test for what constitute reasonable remuneration or arm's-length terms. As a result, many companies opt for the "whitewash" option of shareholder approval.

AustraliaCorporate/Commercial Law
John Elliott
John Elliott
Rod Halstead
Rod Halstead
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Annual general meetings are a convenient time to get shareholder approval for related party transactions (such as the issue of securities to directors).

For that reason, ASIC has used the upcoming AGM season to renew its warnings about the information provided to shareholders before such a vote.

In a recent statement, the Commission reminded companies of what it looks for when examining explanatory materials for a related party benefit vote.

Background

Related party benefits must generally be approved by shareholders of public companies unless they constitute reasonable remuneration or are on arm's-length terms. There is no bright line test for what constitute reasonable remuneration or arm's-length terms. As a result, many companies opt for the "whitewash" option of shareholder approval.

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