FILE NUMBER

Kent Grey, Partner

1 June 2012

Technology in Governance

Risk-intelligent approach to the use of technology “in the Boardroom”

Overview

•What is “technology in the Boardroom”?

• iPads

• Tape recorders/electronic recording devices

• Legal requirements for company record keeping

• Benefits of technology in Boardrooms

• Issues to consider

• Tips/traps

Company Records – Corporations Act 2001

• Requirement to keep minute books – s251A

• Requirement to keep written financial records – s286

• Electronic copies of company records are compliant if:

• secure from unauthorised access, theft, damage, destruction and falsification

• can be reproduced in a hard copy on demand

• can be accessed by those entitled to it

(s1306)

• A person must not conceal, destroy, mutilate or falsify company records (s1307)

Benefits of technology “in the Boardroom”

• Desirability and inevitability of technology “in the boardroom” driven by:

• Portability

• Ease of storing, accessing, searching board papers

• Rapid, timely dissemination of board papers (including updates)

• Convenience of access

• Cost savings/environmental considerations

• Implications are not just “in the boardroom”, but before and after the boardroom:

• company secretarial practices

• directors’ duties

Status of the Law

• Law lagging behind technology

• Use of technology in boardrooms largely untested by Courts

• limited guidance on electronic recordings

• Adverse implications might take some time to emerge

• Best practice tip: implement company policies outlining acceptable uses of technology in Board context

Security & confidentiality

• Materials sent outside the company:

• to private/personal e-mail addresses

• to other companies’ e-mail addresses

• Lack of external security measures

• Materials in “possession, custody, power” of other companies

• Materials captured by other companies’ e-mail systems

• Materials subject to other companies’ document retention policies and security measures (or lack thereof).

Security & confidentiality

• How confidential is the material?

• What is the commercial damage, if materials fall into wrong hands?

• Does the company lose important legal protections?

• ASX Listing Rule 3.1A.2 (ie; the “confidentiality” exception to continuous disclosure)

• Legal Professional Privilege

• Should you restrict ability to save locally or print materials?

• Best practice: encryption, security measures

Directors’ duties

• Centro case (ASIC v Healey & Ors (2011))

• “It is the Board’s responsibility to determine the information that it requires or does not require”

• Directors’ defence relied on volume and complexity of information supplied to board

• Court held:

• Board has ability to control amount and format of information received

• Directors are required to take into account all the information they receive, when performing their duties.

Presentation & delivery of information

• Be wary of exponential increase in volume of information provided for Board’s review

• Be mindful of how information is conveyed;

• content

• presentation

• accessibility

• Are these best not provided in electronic form?

• documents with links to other documents

• financial spreadsheets

• information in larger-than-A4 format (maps, charts)

Reliability of access to electronic materials

•Directors (and ex-directors) have some rights to access board papers:

• common law

• Corporations Act (s198F, s290)

• contract (deeds of access, indemnity & insurance)

• Implement appropriate data protection measures:• security

• back-up/redundancy

• DRP

• Best practice tip: retain one hard copy of board papers and minutes.

Return of Board materials

• Policies requiring return of board materials after meetings

• Deletion from iPads may be problematic:

• backup storage on local devices;

• cloud computing

• ongoing security/confidentiality risks

• Litigation risk (discovery)

Directors’ notes & annotations

• Increasingly important to demonstrate discharge of directors’ duties

• duty of care and diligence – s180(1)

• Business Judgment Rule - s180(2)

• Personal property of director(?)

• Not automatically company “property” (but may be in company’s possession, custody or power)

• Company policies on retention of annotations for future evidentiary purposes

• Discoverability of annotations on board papers.

Tape recording board meetings

• Use of tape recordings in board meetings:

• by company secretary/minute-taker

• by participants at the meeting

• Listening and Surveillance Devices Act 1972 (SA)

• consent required to electronically record private conversations

• exception: for protection of a “lawful interest”

• Alliance Craton Explorer v Quasar Resources (2010)

Conclusion: Tips for use of technology

It is good governance and best practice to:

• Consider “user-friendly” formatting

• Ensure manageable volume of materials is distributed• don’t bombard directors with too much information

• Ensure management of materials remains professional• don’t make late changes, just because they can be

distributed easily at the last minute

• Give directors a choice as to medium of delivery of materials

• financials, spreadsheets & maps may be better in hard copy