COVID-19 has claimed another legislative scalp, with continuous disclosure provisions now on hold in a move the government hopes will prevent opportunistic class actions.
The government will temporarily put continuous disclosure provisions on hold to enable companies to “more confidently provide guidance” during the COVID-19 crisis.
“The government will temporarily amend the Corporations Act 2001 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,” Treasurer Josh Frydenberg said in a statement.
The changes have been made in the hope that it will prevent companies from having class action lawsuits brought against them if their forecasts turn out to be inaccurate. Treasurer Frydenberg warned that companies might stop issuing forward-looking statements, hurting investors in the process.
“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,” Treasurer Frydenberg said.
The changes will be in effect for six months.
The implementation of the royal commission recommendations has also been delayed due to the “significant impacts” of the COVID-19 crisis.
“The deferral will enable the financial services industry to focus their efforts on planning for the recovery and supporting their customers and their staff during this unprecedented time,” Treasurer Frydenberg said.
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