What is the two-strikes rule?
FIRST STRIKE
THE first strike occurs when a company's remuneration report — which outlines each director's individual salary and bonus — receives a "no" vote of 25 per cent or more by shareholders at the company's annual meeting.
SECOND STRIKE
THE second strike occurs when a company's subsequent remuneration report also receives a "no" vote of 25 per cent or more.
When a second strike occurs, the shareholders will vote at the same AGM to determine whether all the directors will need to stand for re-election. If this "spill" resolution passes with 50 per cent or more of eligible votes cast, then a "spill meeting" will take place within 90 days.
SPILL MEETING
AT THE spill meeting, those individuals who were directors when the directors' report was considered at the most recent AGM will be required to stand for re-election (other than the managing director, who is permitted to continue to run the company).
IDEA BEHIND THE LAW
THE reform is intended to provide more accountability for directors and increased transparency for shareholders. When a company receives significant "no" votes on its remuneration report over two consecutive years, and has not adequately addressed concerns raised by shareholders, it is appropriate for the board to be held accountable through a re-election process.
Frequently Asked Questions about this Article…
The two-strikes law is an amendment to the Corporations Act (effective July 1, 2011) designed to hold directors accountable for executive salaries and bonuses. It can force a company board to face re-election if shareholders register significant "no" votes on the company’s remuneration report over two consecutive years.
A first strike occurs when a company’s remuneration report — the document that outlines each director’s individual salary and bonus — receives a "no" vote of 25% or more from shareholders at the company’s annual general meeting.
A second strike happens when the company’s subsequent remuneration report in the following year also receives a "no" vote of 25% or more from shareholders.
After a second strike, shareholders vote at the same AGM on a "spill" resolution to decide whether all directors must stand for re‑election. If that spill resolution passes with 50% or more of eligible votes cast, a spill meeting must be held within 90 days.
A spill meeting is a special meeting held within 90 days after a passed spill resolution. Those who were directors when the directors' report was considered at the most recent AGM are required to stand for re‑election at the spill meeting, with one key exception.
No. The managing director is permitted to continue to run the company and is not required to stand for re‑election at the spill meeting, whereas the other directors who were in place when the report was considered must stand.
A remuneration report outlines each director’s individual salary and bonus, providing transparency about executive and director pay for shareholders to assess.
The reform was introduced to increase transparency and provide more accountability for directors. It gives shareholders a formal mechanism to respond when a company receives significant "no" votes on pay over two consecutive years and has not adequately addressed investor concerns.
Call 1300 880 160
Start a chat
Schedule a call
