Reforms to Australia’s continuous disclosure laws have passed the Parliament over a year since the Morrison government introduced temporary changes to the Corporations Act 2001 as a measure to accommodate the impacts of the coronavirus crisis.
The government has confirmed amendments to the Corporations Act 2001 are now permanent, meaning companies and their officers will only be liable for civil penalty proceedings in respect of continuous disclosure obligations where they have acted with “knowledge, recklessness or negligence”.
According to Treasurer Josh Frydenberg, introducing a fault element will 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,” Treasurer Frydenberg said in a statement this week.
“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.”
The temporary fault element was put in place in May last year to give company directors the space to more confidently provide guidance to the market during this uncertain period.
As a result, Mr Frydenberg revealed, 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,” the Treasurer concluded.