Jurisdiction - Australia
Australia – ‘Two Strikes’ Rule Enters Its Second AGM Season.

 31 August, 2012


Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance


The ‘two-strikes’ rule is entering its second AGM season. Should listed companies, particularly those who received a ‘first strike’ in 2011, be looking carefully at their remuneration framework and shareholder engagement to avoid the risk of a board spill?
In 2011 the Corporations Act 2001 (Cth) was amended to introduce a ‘twostrikes’ rule for the adoption of remuneration reports by listed companies. The ‘two-strikes’ rule gives shareholders the right to vote to spill a board of directors, if 25% or more votes cast are against adopting the company’s remuneration report at two successive AGMs.
During the 2011 AGM season, over 100 listed companies (or about 5% of all listed companies) attracted a vote of more than 25% against adopting their remuneration report, thereby receiving their ‘first strike’.
What happens if a listed company has received a first strike?
A listed company that has received a ‘first strike’ must ensure that its remuneration report in the subsequent year provides an explanation of the board’s proposed action in response to shareholders’ concerns, or an explanation as to why no action is proposed to be taken.
If the remuneration report again receives 25% or more ‘no’ votes at the subsequent year’s AGM, the listed company will receive a ‘second strike’ and shareholders will be permitted to vote at that AGM on whether the board is to be spilled and another meeting (spill meeting) held to consider the election of directors. If 50% or more shareholders vote to hold the spill meeting, the spill meeting must be held within 90 days and all persons who held the position of director when the remuneration report was considered will be forced to vacate their office and stand for re-election.



What should listed companies do?
As listed companies prepare for the upcoming AGM season, it is important for remuneration committees to be mindful of the ‘two-strikes rule’ and the consequences of receiving two successive ‘no’ votes.
Listed companies should consider:
  •  when determining the appropriateness of executive remuneration, any apparent shareholder concerns and developments in the rest of the market (for example, the number of high profile executives offering cuts to their remuneration packages this year);
  • board succession planning;
  • contingency plans in the event of a board spill; and
  • the way in which they engage and deal with remuneration consultants.

For further information, please contact:


James Lonie, Partner, Henry Davis York

[email protected]


Sunil Patel, Partner, Henry Davis York

[email protected]


Robert Tracy, Partner, Henry Davis York

[email protected]


Glenn Hughes, Partner, Henry Davis York

[email protected]


Christina Seppelt, Henry Davis York

[email protected]


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