Getting closer? Senate Committee endorses proposed changes to continuous disclosure and meeting requirements

6 minute read  17.03.2021 Kate Hilder, Mark Standen

The Senate Committee has paved the way for the passage of Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, recommending that it be passed without amendment.  

The Senate Standing Committee on Economics has recommended that Treasury Laws Amendment (2021 Measures No. 1) Bill 2021be passed without amendment.  The Committee's full report is here.

The Committee's reporting date had been extended to 30 June 2021.  However, the report was tabled early by the Committee  in light of concerns raised in a number of submissions about the imminent expiry of temporary COVID-19 measures: Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 and Corporations (Coronavirus Economic Response) Determination (No. 4) 2020 are due to expire on 21 and 23 March 2021 respectively.

Context: Proposed changes 

Broadly the Bill proposes to do two things:

  • Schedule 1 of the Bill proposes to temporarily extend and expand on the measures in Corporations (Coronavirus Economic Response Determination (No 3) 2020 to provide companies with legal certainty around the use technology in the context of holding and conducting meetings, distributing meeting related materials and executing and witnessing documents.  It's proposed that these measures will apply until 15 September 2021.
  • Schedule 2 of the Bill proposes to make permanent the temporary changes to continuous disclosure laws introduced in May 2020, which are intended to insulate directors from opportunistic class actions, and which would otherwise expire in March 2021.

You can read our summary of the proposed measures in the Bill and an overview of the initial response from industry.

The Committee's views on the Bill

The report comments that there was 'widespread support' in submissions on the proposed amendments concerning virtual meetings and electronic communications in Schedule 1.  

The Committee's view is that,

…'the extension of regulatory relief to allow companies and registered schemes to use technology to hold meetings, execute documents and send documents relating to meetings has been effective in facilitating the continuation of business during the COVID-19 pandemic. The extension of these measures supports companies and registered schemes to continue using technology to meet regulatory requirements while uncertainty and barriers to 'business-as-usual' caused by the pandemic exist…The committee welcomes the measures which enhance or expand upon the COVID-19 temporary measures, giving effect to feedback received from consultations. The committee welcomes the Government's consultation on proposals for implementing permanent measures and undertaking an opt-in pilot for hybrid annual general meetings'.

The Committee comments that stakeholder feedback on the changes in Schedule 1 may also 'further assist the formulation of permanent measures and pilot proposals'.

The Committee's view of the proposed changes in Schedule 2 of the Bill is that despite 'different views' on the proposed reforms, they should be passed without amendment. The Committee writes,

'…there is significant support for the aims underpinning the amendments. In the committee's view, the reforms strike an appropriate balance. On the one hand, they provide business and markets with sufficient certainty to pursue growth and facilitate economic recovery from the pandemic without the prospect of opportunistic shareholder class actions. On the other hand, the reforms retain sufficient sanctions to deter misconduct and maintain Australia's global reputation for market cleanliness. Submissions identified further suggestions for amendments to Schedule 2. As the committee has not received other evidence on those suggestions, it simply notes these comments for the Government's consideration'.

Dissenting reports

Labor and Greens Committee members support for the passage of Schedule 1 amendments 

Both Labor and Greens Committee members support the passage of the changes in Schedule 1.  

  • Labor members recommended that 'Schedule 1 should ensure shareholders are always able to elect to receive communications and execute documents by either hard copy and/or electronic means, and also attend AGMs in person and/or by electronic means. The pilot of hybrid-AGMs is supported, subject to review'.
  • The Greens recommended that Schedule 1 be supported on the basis that the changes are temporary. In making the recommendation Greens members stressed the need for 'further consideration' before changes are made permanent. The report states,

…'we are concerned that continued temporary extensions of these measures will encourage the government to attempt to make these measures permanent without due consideration, such as is being attempted with Schedule 2 of this Bill. Virtual AGMs could significantly constrain the ability of shareholders to hold companies to account. The parliament must be given the opportunity to fully examine the merits of any proposal to permanently allow virtual AGMs'.  

Schedule 2: Labor and the Greens oppose proposed changes to continuous disclosure obligations

In separate dissenting reports, Labor Committee members Deputy Chair Alex Gallacher and Senator Jenny McAllister and Greens Committee member Nick McKim opposed the passage of the changes in Schedule 2.  

Labor Committee members considered that the proposed changes would serve to undermine continuous disclosure.

'This change undermines the fundamental integrity of the share market, and is bad for ordinary investors…Labor Senators are of the view that the changes to continuous disclosure rules could lead to major failures of disclosure. These failures could have significant costs for millions of Australian investors and shareholders, and make Australia a less attractive destination for international investment.'

Greens Senator Nick McKim also opposed the proposed changes for similar reasons. Mr McKim considers existing laws to be a necessary accountability mechanism that operate to safeguard shareholders' interests and rejects claims that they place an overly onerous burden on companies or their directors. Mr McKim states that,

'Schedule 2 effectively reverses the burden of proof for civil action. This will pave the way for insider trading and be a boon for private equity and other large institutional investors who expect to be the first to know. On a wink and nod, the rich and the powerful will get the good oil, buy or sell ahead of the masses, and the companies and their bosses who participate in or facilitate this will, with a little cunning, be immune from any repercussions….Schedule 2 will benefit those on the inside and those with market power at the expense of millions of ordinary Australians who rely on timely and accurate information about their investments, including investment made through superannuation.'

Current Status of the Bill?

  • The Bill has yet to pass either House and is currently before the House of Representatives.  
  • Notwithstanding the Committee report on the Bill outlined above, the Senate has agreed to refer to Bill back to the Economics References Committee for inquiry and report by 30 June to allow more time for submissions.  Senate debate on the Bill has been adjourned until the first sitting day in August 2021.

[Source: Senate Standing Committee on Economics Report: Treasury Laws Amendment (2021 Measures No.1) Bill 2021 [Provisions]] 


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