A statement issued by Treasury on Wednesday has revealed the government’s intention to push for the permanent relaxation of disclosure laws, which would mean companies and their officers would only be held liable in civil penalty cases for continuous disclosure obligations where they have acted with “knowledge, recklessness or negligence”. 

The bill would also make clear that companies and their officers are not liable for misleading and deceptive conduct in circumstances where the continuous disclosure obligations have been contravened, unless the requisite “fault” element is also proven.

But Treasurer Josh Frydenberg’s intention to cement what was intended to be a temporary measure, to shield businesses from disgruntled shareholders for the duration of the COVID-19 recession, has been labelled a cop-out by Class Actions Australia.

According to CAA, “watering down” Australia’s disclosure laws would only weaken the economy by making it easier for company directors to act poorly and dodge accountability.

“Funny how the pandemic crisis has apparently abated enough to stop JobKeeper, but is still serious enough to warrant permanently watering down corporate responsibility,” said Class Actions Australia spokesperson Ben Hardwick.

“The ASX is about to hit an all-time high, and the Treasurer thinks it’s important to offer extra shields to company directors to avoid accountability. It’s madness,” he added.

Mr Hardwick is certain the changes would disadvantage mum and dad investors. 

“Australia’s robust stock market disclosure laws mean investors can operate from a position of knowledge. Australian directors know they have to be open with the market or they might be accountable to their investors through a class action. Josh Frydenberg is apparently uncomfortable with this situation.

“His plan to water down continuous disclose laws would advantage powerful company directors over mum and dad investors,” Mr Hardwick said.

Labor, too, is expected to oppose the government, with Mr Hardwick confident the new laws won’t make it through Senate.

“Josh Frydenberg has revealed his hand with this decision, but I suspect the Senate crossbench may have greater integrity when it comes to defending the true interests of investors and our markets,” Mr Hardwick said.

“The last thing we should want is for Australia to develop an international reputation as a jurisdiction that’s soft on corporate misbehaviour. That’s a sure-fire way to dry up investment,” he cautioned.

Conversely, Mr Frydenberg is convinced this extension is what the economy needs.

“These changes strike the right balance between ensuring shareholders and the market are appropriately informed while also allowing companies to more confidently make forecasts of future earnings or provide guidance updates without facing the undue risk of class actions,” a statement from his office read.