The Corporations Act 2001 was amended from 1 July 2011 to provide for the 'two strikes' rule in relation to the remuneration report. At the annual general meeting, the shareholders must vote approval or otherwise of the remuneration report. The first strike is when a company’s remuneration report receives a ‘no’ vote of 25 % or more. Where this occurs, the company’s subsequent remuneration report must explain whether shareholders’ concerns have been taken into account, and either how they have been taken into account or why they have not been taken into account.
The ‘second strike’ occurs where the company’s subsequent remuneration report receives a ‘no’ vote of 25 % or more. Where this occurs, shareholders will vote at the same annual general meeting to determine whether the directors will need to stand for re-election within 90 days. If this resolution passes with 50 % or more of eligible votes cast, then the ‘spill meeting’ will take place within 90 days. At the spill meeting, those individuals who were directors when the report was considered at the most recent annual general meeting will be required to stand for re-election (other than the managing director, who is permitted to continue to run the company).v
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