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Welcome changes around continuous disclosure

Capital Markets, Corporate and M&A
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Lead Commercial Partner Jonathan Wenig has welcomed the Treasurer’s announcement of temporary changes to continuous disclosure provisions for companies and officers to enable them to more confidently provide guidance to the market during the coronavirus crisis.

“Over recent weeks, Arnold Bloch Leibler has advocated for this change, as the impact of the pandemic and the uncertainty it continues to generate has made it extraordinarily difficult for companies to release reliable, forward-looking guidance to the market,” said Jonathan. “While the Business Council of Australia has been calling for a moratorium on shareholder class actions, the Treasurer has adopted an alternative approach to achieving the BCA’s broad objectives.”

In a submission made last month to the Treasurer, plus the heads of the ASX and ASIC, ABL observed that: “Business decisions and whether directors and companies have met their continuous disclosure obligations are assessed in hindsight. It is important that the continuous disclosure regime takes into consideration the current pandemic and uncertainty in the market to reduce the risk that companies and directors are exposed to where disclosures are withheld on the basis of current information and where forecasting is near-impossible.”

The submission proposed that for the duration of the COVID-19 pandemic, a listed disclosing entity should only be taken to have failed to comply with the section of the Corporations Act around continuous disclosure provisions “where the has been a serious, wilful or material breach of the section”.

As the submission explains: “This proposal will create a higher bar for shareholders who bring class actions relating to a listed entity’s continuous disclosure obligations during the COVID-19 pandemic.

Shareholder class actions as currently permitted are an excessive response to companies and in this context, may subvert the rule of law.

“The proposal is designed to preserve the status quo and enable companies to effectively operate in this environment without exposing them to undue risk or liability while also ensuring that shareholders have a mechanism to redress serious breaches of the disclosure regime.”

Business commentator John Durie writes in The Australian today that “ABL’s Jonathan Wenig argues the Treasurer had the right balance by resisting business pleas to shut down class actions and at least leave the door open.” To read Durie’s column, click here.

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