Following the recent Parliamentary Inquiry into class actions and public debate around regulatory settings during COVID-19, Treasurer Josh Frydenberg has announced his intention to legislate permanent reform to continuous disclosure laws.

If passed by Parliament, the law would ensure that 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”.

The proposal is consistent with the temporary relief provided by the Treasurer during COVID-19 with the important exception that it is intended to extend to potential liability for misleading and deceptive conduct (which was originally omitted from the Treasurer’s COVID-19 relief). In other words, a plaintiff would need to prove fault where misleading or deceptive disclosure is alleged (ensuring alignment with the approach taken to the continuous disclosure provisions).

This would effectively be a rebalancing of disclosure settings, and should act as a significant disincentive to the bringing of speculative shareholder class actions. In particular, the Government anticipates that the reform would trigger costs savings for Director and Officer insurance given securities class actions have been a primary driver of recent increases.

Extension of virtual AGMs and electronic communication relief to 15 September 2021

At the same time, the Treasurer has announced his intention to extend the expiry date of the temporary relief allowing companies to use technology to meet regulatory requirements to hold meetings, such as annual general meetings, distribute meeting related materials and validly execute documents from 21 March 2021 to 15 September 2021. Following 15 September 2021, meetings will need to be conducted consistent with pre-COVID-19 laws which require an-in person meeting to be held.

The Government will also conduct a 12 month opt-in pilot for companies to hold hybrid annual general meetings to enable a proper assessment of the shareholder benefits of virtual meetings. The Government will also finalise permanent changes to allow electronic signing and sending of documents prior to the expiry of these temporary arrangements. This has been brought about due to the mixed reactions from shareholders on Virtual AGM software and processes conducted over the last 6 months.