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News update

Q&A with Governance Institute

Megan Motto FGIA speaking with Catherine Maxwell FGIA FCG

Each month in our News Update, the Governance Institute will answer some common questions about governance and risk management.

Given the widespread use of electronic registry software, do companies still prepare share certificates, particularly on the issue of shares to wholly owned entities in a corporate group?

It is a requirement under s 1070C of the Corporations Act to issue share certificates. However, many companies now use electronic registry software to store share registers which essentially captures the same information as is shown on a share certificate, although in a different format. Despite the use of electronic registry software, many companies still produce share certificates on the issue of shares to wholly owned entities. Other companies generate share certificates as needed. Missing share certificates can cause difficulties in situations such as updating deeds of cross guarantee or where a bank is lending money to a company. Governance Institute members consider the requirement under s 1070C of the Corporations Act is outdated and overdue for reform. The Institute has advocated for some time about the need to modernise the Corporations Act to make it fit for the 21st century.

What is the usual limitation period for directors’ deeds of access and indemnity?

Companies usually provide directors and/or officers with indemnities through their constitutions and deeds of indemnity. These deeds are an agreement between the company and a director which may give current and former directors: the benefit of an indemnity, directors’ and officers’ indemnity (D&O) insurance and access to documents and the D&O insurance policy, during and after the period they are a director. The indemnity period is typically for a limited time. While some companies have a limitation period as long as fifteen years, most companies adopt an access period of seven years. Another approach is to not set a time limit on access but to only retain documents for seven years.

Witnessing Commonwealth Statutory Declarations

A statutory declaration is a statement of fact that a person declares to be true. It can be used as evidence. A statutory declaration may be needed for many reasons, such as: confirming personal details, financial matters, health matters or evidence for sick leave. Making a false statement on purpose can lead to being charged with an offence. The Commonwealth, states and territories all have different statutory declarations. If you are executing a Statutory Declaration it is important to check the rules of the State or Territory in which the Declaration will be used. Governance Institute members are eligible witnesses of Commonwealth Statutory Declarations. For more information about who else can witness a Commonwealth Statutory Declaration see the Attorney General’s website.

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