Clerp 9

Clerp 9 dictates that public companies and by default, larger private firms on both sides of the Tasman must tighten their information systems. The drivers attached to this trend are found in the array of corporate governance legislation emerging globally.

Following a lengthy consultation process in Australia, the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004, now referred to as CLERP 9, received Royal Assent on the 30th of June 2004,

Its introduction is viewed by many as being too rapid, having been applied to all listed companies as of the 1st of January, 2005. The Act focuses on financial reporting.

Datasouth Corporate Services summarises the changes here:

• Auditor attendance and availability for questions is required at the AGM at which the auditors report is tabled.
• Certification of the financial statements by the CEO and CFO.
• Statements as to the auditor's conflict of interest with its non-auditory services.
• Disclosure of management discussion and process.
• Non-binding shareholder resolutions as to the adoption of remuneration reports.
• Full disclosure of the remuneration of all directors and the top ten executives (consolidated group) together with the board's policy for such determination.

In addition the legislation provides for an inspection of auditor integrity such as the auditor rotation policy, auditor compliance with the Corporations Act, restrictions on employment, rules around directorships appointed to prior auditing personnel, whistleblower protection - and the list goes on.

In New Zealand, many of these requirements are pronounced already. The principle difference though is that they are found in a wide range of legislative standards, and not all of them have the 'force of law' as in Australia. The Institute of Chartered Accountants Code of ethics makes provision for the conduct of auditors, whilst the Securities Markets Act 1988 sets the continuous disclosure framework. Furthermore legally binding standards are attached to the NZX Listing Rules (ie - the establishment of an audit committee). It is true that other such practices are merely "encouraged" within the Corporate Governance Best Practice Code, however financial reports must also provide descriptions of how the company's governance practices differ from the code in any regard.

It should also be noted that the on-going push for trans-Tasman integration of policy, particularly in the finance sector (refer the development of a single economic market - Trans-Tasman Accounting Body Cross Appointments ) and the international crackdown on corporate governance as a whole, means that is likely New Zealand will put into law, the current principles based corporate governance framework.

See Legislative Standards for Clerp 9.