The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 passed the Senate with amendments on Monday night, meaning it will return back to the House of Representatives for what is expected to be an uneventful vote.
The reforms permanently extend relief provided to listed companies during the COVID crisis, meaning company directors will not be held liable for contravening continuous disclosure rules unless they can prove the contravention was knowingly reckless or negligent.
The government secured the votes of cross-bench senators including Pauline Hanson and Rex Patrick to guarantee passage of the laws, with Senator Hanson agreeing on the basis that a review into the impact of the reforms be conducted in two years, while Senator Patrick put up his own amendments that eventually fell one vote short of being passed.
The news comes following previous complaints from major financial institutions that the wide scope for class actions in the Australian legal system was leading to skyrocketing business costs.
Slater and Gordon head of class actions Ben Hardwick has previously said the changes give directors “a get out of jail free card” and were “another blow for mum and dad investors”.
“Australian directors know they have to be open with the market or they might be accountable to their investors through a class action. Scott Morrison and Josh Frydenberg are apparently uncomfortable with this situation,” Mr Hardwick said.
“For the past two years this government has demonstrated to Australians that it’s got its priorities wrong. It’s a disgrace. Clearly for the LNP protecting their mates from being accountable is a bigger priority than protecting the financial futures of everyday Australians.”
Manager of opposition business in the Senate Katy Gallagher said the measures would make it easier for companies to get away with providing misleading information to shareholders.
“Without corporate disclosure rules, dodgy directors can get away with not releasing crucial information to shareholders, and the overwhelming majority of good directors know that this is not in anyone’s interests,” Senator Gallagher said during the debate over the bill on Monday.
Arguing for the government in the debate, financial services minister Jane Hume said the changes addressed an “unsustainable burden” on the effective operation of companies, given civil penalties for an inadvertent breach of disclosure obligations were currently up to 10 per cent of turnover.
Senator Hume said ASIC would still be able to bring criminal and administrative action against companies for breaching obligations, and the legislated two-year review of the reforms would “ensure there is a legislative process” for considering their impact.
