Frydenberg acts on company disclosure laws

·2-min read

Making a mistake or plain ignorance won't land companies and their officers in trouble under permanent changes to disclosure laws introduced to federal parliament.

Treasurer Josh Frydenberg is changing the corporations laws instead of allowing temporary relief to expire next month.

Companies and their officers will only be liable for civil penalty proceedings on breaches of continuous disclosure obligations if they have acted with "knowledge, recklessness or negligence".

"This will discourage opportunistic class actions under our continuous disclosure laws," Mr Frydenberg said.

The bill introduced to parliament on Wednesday also makes clear that companies and their officers are not liable unless a "fault" element is proven.

Mr Frydenberg said the introduction of the "fault element" for private actions more closely aligns Australia's continuous disclosure regime with the approach taken in both the US and the UK, as recommended by last year's parliamentary review into litigation funding and class actions.

"The changes do not affect the Commonwealth's ability to prosecute criminal breaches or ASIC's ability to issue infringement notices and administrative penalties without proving fault," he said.

Lobby group Class Actions Australia said the treasurer's plan to "water down" disclosure laws will weaken the economy by making it easier for company directors to misbehave and dodge accountability.

"Funny how the pandemic crisis has apparently abated enough to stop JobKeeper, but is still serious enough to warrant permanently watering down corporate responsibility," spokesperson Ben Hardwick said.

"The ASX is about to hit an all-time high, and the treasurer thinks it's important to offer extra shields to company directors to avoid accountability. It's madness."

Mr Frydenberg said 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 update guidance without facing the undue risk of class actions.