Background to the ASX requirements
In August 2002, the ASX Corporate Governance Council was convened by the Australian Securities Exchange (ASX). According to the ASX, “the primary role of the Council is to develop and issue principles-based recommendations on the corporate governance practices to be adopted by ASX listed entities. The recommendations are intended to promote investor confidence and to assist listed entities to meet stakeholder expectations in relation to their governance.” Listed entities are required to benchmark their corporate governance processes against what is recommended by the Council and report any non-conformity, along with explanations for alternative positions.
The Council’s recommendations are published in the Corporate Governance Principles and Recommendations (CGPR) 3rd edition 2014, which took effect on 1 July 2014 and apply for a listed entity’s first full financial year. The CGPR recommendations include guidance on ASX Director background checking.
ASX Listings Compliance is responsible for monitoring and enforcing compliance with both the ASX listing rules and ASX operating rules and it publishes various guidance notes to assist organisations with compliance. ASX Listing Rules Guidance Note 1: Applying for Admission – ASX Listings details the requirements for listing organisations to ensure that their directors are of “good fame and character”, including obligations for background checking.
Whilst background checking for directors has been a requirement of the ASX for new listings for many years, a change in recent times saw the extension of this requirement to listed entities, where background checks must be run prior to appointing new directors or putting a new candidate up for election.
It is recommended that organisations currently or applying to be listed on the ASX consider the recommendations of both the CGPR and ASX Listing Rules Guidance Note 1 regarding background checks required for directors.
Background Checks Required
The CGPR advises that a listed entity should ensure that “appropriate checks are undertaken before it appoints a person, or puts forward to security holders a new candidate for election, as a director”. The commentary attached to this recommendation outlines that this should include checks relating to the individual’s:
- Criminal Record; and
- Bankruptcy History
Additionally, the commentary recommends that certain information is provided to security holders in order for an informed decision to be made regarding election or re-election, including:
- any findings from the background checks undertaken;
- details of relevant qualifications, skills and experience; and
- specifics as to any “material directorships”.
ASX Listing Rules Guidance Note 1 provides details as to the criminal history and bankruptcy checks required, advising that each Director should have the following undertaken:
- National Criminal History Check (from the Australian Federal Police, State or Territory Police Service or a broker accredited with the Australian Criminal Intelligence Commission); and
- Bankruptcy check of the National Personal Insolvency Index held by the Australian Financial Security Authority.
Original or certified, true copies of checks are required to be provided to the ASX and must be less than 12 months old at the time of submission.
ASX Listing Rules Guidance Note 1 outlines that, where the director has been a resident of another country/ies in the past 10 years, an equivalent National Criminal History Check and Bankruptcy Check is required to be undertaken and provided to the ASX, along with a translation, where relevant. Where these checks may not be available in a given country, a statutory declaration must be provided confirming that the candidate has not been convicted or declared insolvent in that country. Guidance is provided in ASX Listing Rules Guidance Note 1 as to approved providers of international background checks, with PeopleCheck being one of three providers recomended.
Recommendations for Compliance
PeopleCheck recommends the following background checking package as a minimum in order for listed entities to comply with the requirements of the ASX as outlined in the CGPR and ASX Listing Rules Guidance Note 1:
- Employment Verification (two most recent): “Experience”
- Manager Interview/Reference (two most recent): “Character”
- Qualification Verification (highest completed): “Education”
- Police Check: “Criminal Record” (includes free Identity Validation)
- Bankruptcy Check: “Bankruptcy History”
- Directorship Check: “Material Directorships”
The ASX advises that background checks should be completed before appointment or the individual being put forward for election, so these should be arranged in the weeks preceding the director’s official appointment date. This will allow time for the necessary background checking information and consent to be collected and the required checks undertaken, which takes an average of 2 to 5 working days to complete.
Consideration should also be given to whether the director has resided overseas and may have previous experience or qualifications in international locations. If so, equivalent international background checks are to be undertaken, including criminal history and bankruptcy checks in the country/ies in which the individual has resided. Additional time should be allowed for overseas background checks as these can take up to six weeks in some countries.
Outsourcing Background Checks
Many ASX-listed entities opt to outsource their background checking requirements to a specialist third party. In doing so, it is recommended that you select a provider that:
- is accredited to offer all of the checks your organisation requires for compliance with the ASX (not just police checks);
- has adequate international capabilities for cases where directors have resided overseas and the equivalent criminal history and bankruptcy checks are required;
- provides adequate supporting documentation as proof of the background checks being undertaken in order for this to be submitted to the ASX;
- offers an end-to-end solution that will ease the administrative burden to your organisation by facilitating easy, online ordering of a customised package of checks;
- provides your directors with a simple and streamlined process for providing the information and consent required for their background checking;
- has best practice processes for ensuring accurate results; and
- thoroughly understands the ASX requirements around background checking and relevant legislation.
For more information on how PeopleCheck can assist with your organisation’s ASX background checking requirements, please contact us via phone on +612 4023 0603 or email us at email@example.com.
- ASX – http://www.asx.com.au
- ASX Corporate Governance Council – Corporate Governance Principles and Recommendations 3rd Edition – http://asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf
- ASX Listing Rules Guidance Note 1: Applying for Admission – ASX Listing – https://www.asx.com.au/documents/rules/gn01_admission.pdf
The information contained in this paper is the opinion of PeopleCheck Pty Ltd and does not form the basis of legal advice