Legislation to make temporary changes to Australia’s continuous disclosure laws in May 2020 permanent has passed Parliament.
The Treasury Laws Amendment (2021 Measures No. 1) Bill amended the Corporations Act 2001 so companies and their officers would only be liable for civil penalty proceedings in respect of continuous disclosure obligations where they acted with “knowledge, recklessness or negligence”.
Critics of the bill said it would water down integrity standards and could compromise market integrity.
The measures had previously been extended with the Government citing the COVID-19 pandemic creating an unfair obligation for companies and officers to make accurate disclosures in an uncertain environment.
Treasurer Josh Frydenberg said the introduction of a fault element would more closely align Australia’s continuous disclosure regime with that of the United States and the United Kingdom.
“The Government’s reforms follow a review by the Parliamentary Joint Committee on Corporations and Financial Services as part of its inquiry into litigation funding and the regulation of the class action industry,” Frydenberg said.
“These changes will mitigate the risk of companies and their officers being subject to opportunistic class actions under our continuous disclosure laws and in doing so, will support companies and their officers to release forward-looking guidance to the market.
“Importantly, during the period the temporary fault element was in place, Treasury identified that there was an increase in the number of material announcements to the market, relative to the same period last year.
“The changes strike the right balance between ensuring shareholders and the market are appropriately informed while also allowing companies to more confidently make forecasts of future earnings or provide guidance updates without facing the undue risk of class actions.”