BHP rules relaxed as restructure looms but headquarters will be in Australia

BHP will be free to base a future finance boss overseas if shareholders vote in favour of sweeping changes to its corporate structure in January.

BHP chairman Ken MacKenzie, left, and chief executive Mike Henry.

BHP will be free to base a future finance boss overseas if shareholders vote in favour of sweeping changes to its corporate structure in January, but will still be required to maintain its headquarters in Australia and hold the majority of its board meetings locally.

The changes to restrictive rules binding BHP to its Australian home were agreed by federal Treasurer Josh Frydenberg ahead of a shareholder vote on ending BHP’s dual-listed structure.

Set in 2001 by Peter Costello, when BHP merged with UK-listed Billiton, the original rules required that both BHP’s chief executive and chief financial officer be based in Australia, that a majority of meetings of its directors and executive leadership team be held inside the country, and that Australia Australia must remain the “centre of administrative and practical management” of the company.

Against the backdrop of a global pandemic that has changed the way most international corporate giants do business – pushing board and management meetings online, and severely curtailing international travel – the decision of its board to end the dual-listed structure allowed the mining major to push for a modernisation of the 20-year old conditions.

Under the new rules BHP boss Mike Henry will still be required to live in Australia, and maintain his principal office – and BHP’s corporate head office – in the country.

BHP has only recently appointed a new Melbourne-based chief financial officer, David Lamont, who is not believed to have any desire to relocated overseas.

But, with BHP increasingly looking to outside Australia for future growth, particularly in the Americas, under the new rules BHP would be free to relocate a future finance boss overseas to be more accessible to offshore investors and financial markets.

The rule requiring BHP to hold the majority of meetings of its executive leadership team in Australia has also been removed, although it will still be required to hold more than half of its board meetings locally – mostly likely as a result of the governments desire to ensure BHP maintains a healthy representation of Australian nationals on its board.

BHP released the full details of its reunification plans to shareholders on Thursday, ahead of a January 20 vote on the proposal.

The independent expert report on the proposal, prepared by accounting firm Grant Samuel, said the unification proposal was likely to be in the best interest of BHP shareholders.

But it also warned shareholders to expect volatility in BHP shares in the aftermath of the collapse of the DLC as BHP will be removed from key London share indexes as a result, forcing UK index funds to dump shares.

The corresponding increase in the number of Australian-listed shares will also force buying from local index funds, balancing out in the medium term.

“Overall, flowback/flowforward analysis suggests that there should be no overall diminution in index and large active fund demand for BHP shares, although there could be some timing imbalances that result in volatility in the share price,” the report said.

“This volatility may be exacerbated by arbitrage and other speculative trading around this dynamic.”