Freehills partner Bob Baxt has warned company directors that they need to focus more seriously on compliance with their legal obligations.
Mr Baxt said a recent Federal Court ruling, which ordered listed tech company Chemeq to pay $500,000 in fines for failing to meet its continuous disclosure obligations, had set new standards.
“The importance of that case is that, for the first time that I can recall, the so-called culture of compliance which the Commonwealth introduced effectively in 2001 has come to bite,” Mr Baxt said.
In his ruling, Justice French spelt out criteria for judging compliance and determining penalties.
“In a series of comments, he talks about the importance of having a culture of compliance, the need to not just give lip service, the need to ensure it is pushed down from the top and permeates the organisation, that management reviews it and refreshes it so that it takes account of changing circumstances,” Mr Baxt said.
While the Chemeq case concerned continuous disclosure rules, Mr Baxt said the principles would apply across the board to all areas of compliance, including occupational health and safety. He said many companies were failing to focus on the issue.
“I think there are many company secretaries and legal counsel who are very frustrated by their inability to get their boards to take seriously this idea that they need to have a culture of compliance.”
While this area of law targets corporations, Mr Baxt said it could be extended to individuals.
ASIC hailed the Chemeq ruling as a major development.
“This is the highest penalty awarded in Australia against a listed company for breaches of continuous disclosure rules,” ASIC chairman Jeff Lucy said. “These court orders emphasise the importance of timely and accurate disclosure to shareholders and the market.”