- Continuous disclosure obligations have been the subject of much debate in Australia in recent years.
- Between May 2020 and March 2021, temporary changes were made to the continuous disclosure laws to bring Australia closer in line with disclosure requirements in other jurisdictions.
- These temporary changes are now permanent, albeit subject to an independent review in two years.
On 10 August 2021, the Federal Government passed the Treasury Laws Amendment (2021 Measures No.1) Bill 2021 (Cth) (‘the Bill’). Among other things, the Bill amended the Corporations Act 2001 (Cth) to introduce a fault element for civil penalties and private action for alleged breaches of Australia’s continuous disclosure laws. It received Royal Assent on 13 August 2021 and the continuous disclosure amendments took effect on 14 August 2021.
These new laws are in line with recommendations made by the Parliamentary Joint Committee on Corporations and Financial Services following its inquiry into litigation funding and the regulation of class actions.
In this article, we explore the background to the Bill and examine whether the amendments represent a seismic change to Australia’s disclosure and class action landscape, or merely shifts the sand.
History of reform
The Bill was introduced following temporary modifications of continuous disclosure laws instituted by the Federal Government in May 2020 to provide relief to companies and officers from opportunistic shareholder class actions during the COVID-19 global pandemic. (The temporary modifications were in place for a total of twelve months and lapsed on 22 March 2021: see Corporations (Coronavirus Economic Response) Determination (No. 2) 2020 (Cth) and Corporations (Coronavirus Economic Response) Determination (No. 4) 2020 (Cth). Those temporary measures replaced the objective ‘reasonable person’ test for materiality with a subjective test. As a result, during the period of temporary relief, a civil claim for a continuous disclosure breach was only available where the non-disclosure occurred deliberately (i.e. the information was known to be material), or if the company unjustifiably turned a blind eye to the risk (i.e. was reckless), or if the company ought to have known (i.e. was negligent) that the information was material.
In addition, in May 2020, the Federal Government referred to the Parliamentary Joint Committee on Corporations and Financial Services terms of reference for an inquiry into litigation funding and the regulation of class actions. In December 2020, the Parliamentary Joint Committee delivered its recommendations, proposing that the Australian Government permanently legislate changes to continuous disclosure laws (among other things) in an effort to curb the excesses of opportunistic shareholder class actions.
In February 2021, the Bill was originally introduced into Parliament, however it was not able to be passed before the expiry of the temporary relief. Instead, the Bill was sent to the Senate Economics References Committee for review. Ultimately, to secure sufficient Senate support, an automatic sun-setting clause was added, which would operate if the Treasurer failed to trigger a review of the continuous disclosure amendments after two years.