25/05/2020 - 23:21

Govt relaxes company disclosure rules

25/05/2020 - 23:21

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The federal government has temporarily amended continuous disclosure provisions that apply to companies and their officers, citing concern about companies being exposed to opportunistic class actions.

The federal government has temporarily amended continuous disclosure provisions that apply to companies and their officers, citing concern about companies being exposed to opportunistic class actions.

Treasurer Josh Frydenberg said the uncertainty generated by COVID-19 had made it considerably more difficult for companies to release reliable forward-looking guidance to the market. 

Therefore, the government has temporarily amended the Corporations Act so that companies and officers will only be liable if there has been “knowledge, recklessness or negligence” with respect to updates on price sensitive information to the market.   

In a statement, Mr Frydenberg said the heightened level of uncertainty around companies’ future prospects exposed them to the threat of opportunistic class actions for allegedly falling foul of their continuous disclosure obligations if their forecasts are found to be inaccurate. 

He was concerned that companies may hold back from making forecasts of future earnings or other forward-looking estimates, limiting the amount of information available to investors. 

“The changes announced today will make it harder to bring such actions against companies and officers during the coronavirus crisis and while allowing the market to continue to stay informed and function effectively,” Mr Frydenberg said.  

The changes will be in effect for six months.

The ASX supported the changes, which they were consistent with maintaining Australia’s continuous disclosure regime.

“The temporary changes will not detract from the way the ASX monitors and enforces its rules,” a spokesman said.

“We will continue to work closely with government, regulators and other stakeholders to ensure the best outcomes for the Australian market, especially during the current pandemic."

The Australian Institute of Company Directors chief executive Angus Armour welcomed the announcement as a critical step in acknowledging the challenges facing the business community to rebuild in the wake of COVID-19.

“While we are strongly supportive of a robust continuous disclosure regime to maintain market integrity, practically the current environment does not allow the same confidence in making forward statements or providing guidance,” Mr Armour said.

“This measure allows directors to provide greater disclosure in this uncertain environment at the same time as it maintains measures to discipline irresponsible companies to protect the community.”

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STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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