Senate debates

Monday, 9 August 2021


Treasury Laws Amendment (2021 Measures No. 1) Bill 2021; Second Reading

7:02 pm

Photo of Slade BrockmanSlade Brockman (WA, Liberal Party) Share this | Hansard source

I too rise to speak on the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021. With the indulgence of the Senate, I will briefly give a quick hello to my children, who I think are listening. Hi, Jonathan. Hi, Eleanor. Hi, Felicity. I will now get on with my speech. I first want to pay tribute to a previous speech in this place from my colleague Senator Scarr. It really goes to demonstrate the breadth of experience and talent on this side of the chamber. Senator Scarr was very much in his wheelhouse and could bring on-the-ground experience from previous roles to this place when discussing this very important issue. I certainly can't emulate that experience, but it's certainly great to have that voice of wisdom and knowledge in this place. That was an extraordinarily good contribution from my colleague.

However, I wish to speak on this bill in part because, as Chair of the Senate Economics Legislation Committee, we had two bites of the cherry on this bill. We looked at this one in the Senate Economics Legislation Committee, which is correctly where the bill was initially referred. It is a matter of some import. The government acknowledges that and, quite correctly, the Senate Economics Legislation Committee did look at it. Then, as is its right, admittedly, this place decided to refer it to the Senate Economics References Committee for a second look. While I question the worth of doing that, who did we hear from in the Senate references hearings? Who was it that those opposite were so keen to hear from about this bill? It was, of course, the class action litigators and the class action litigation funders, and you don't have to be a rocket scientist to work out why: they've got some interest in this matter because it undermines a business model, not because it fundamentally changes continuous disclosure in this country. And that is a very important thing for all those small investors out there to understand. Contrary to what is perhaps being propagated in this place by those opposite, this is not undoing continuous disclosure in this place. The continuous disclosure regime is strong. It's an extraordinarily positive part of our corporate regulatory environment and it continues to play an important part. As Senator Scarr pointed out and as was pointed out by many in the committee hearings on this matter, this removes a strict liability provision. It does not change the obligations of continuous disclosure under the Corporations Law.

I do wish to start, however, with schedule 1 of the bill, which reinstates the temporary relief which allowed companies to use technology to meet regulatory requirements to hold meetings, distribute meeting related materials and validly execute documents electronically. This expired on 21 March 2021. This relief was initially introduced in May 2020, using a temporary instrument making power, which was inserted into the Corporations Act as part of the government's response to the coronavirus crisis and was subsequently extended. The relief enables the continuation of businesses by allowing companies to hold meetings virtually and to send meeting related materials and execute documents electronically. The extension of this relief will allow businesses to continue to comply with their regulatory requirements as they continue to deal with coronavirus outbreaks as they occur. While this relief expired in March 2021, the rationale for introducing it remains: uncertainty remains due to coronavirus related public health orders that are introduced from time to time. To ensure companies and their officers have sufficient flexibility to comply with their regulatory requirements, parliamentary amendments are being made to schedule 1. So we're extending schedule 1 from 15 September 2021 to 31 March 2022, removing the requirements for companies and registered schemes to notify members of their right to elect to receive documents in hard copy and giving ASIC permanent powers to issue relief for requirements in respect of meetings and documents in exceptional circumstances, such as those caused by coronavirus.

The amendments address feedback from the Senate economics committee and stakeholder feedback received as part of the committee's inquiry. The extended relief will give certainty to many listed and unlisted companies that have 30 June and 30 September year ends and are expected to hold their AGMs in the second half of this year or early next year. The amendments remove the requirement for companies and registered schemes to notify members of their right to opt in to receive meeting related documents in hard copy—that is, they will not have to notify within two months of the bill passing and within two months of a person becoming a member. This addresses feedback received during various inquiries into the bill. Stakeholders noted that the notification requirements introduced unnecessary regulatory burden because they require companies to send a bespoke notification. However, this is mitigated by the following. Many members have already consented to receive electronic copies, and the company or registered scheme will only be able to send documents by electronic means if the company has the member's electronic communication details, and members who have not provided electronic communication details may receive a postcard on how to access documents online. Finally, the members who opted in to receive hard copy documents will continue to receive hard copy documents. In addition, alternative notification requirements are being explored for future permanent reforms.

Entities will also have greater certainty that, as exceptional circumstances arise from time to time, such as we are currently in, ASIC will have the permanent power to issue relief, including extending time frames within which AGMs must be held; allowing for meetings to be held virtually and for documents, whether or not meeting related, to be sent electronically and for standing elections to receive hard copies; and extending the time frame for an entity to provide documents to members. Overall, the amendments provide greater flexibility and certainty to businesses to meet their obligations during the disruptions caused by the coronavirus crisis or similar future disruptions.

I wish to speak briefly about schedule 2, which is obviously the area which has caused the most contention in this place. The government provided temporary relief to companies during the coronavirus crisis surrounding disclosure to the market. The instrument allowed them to make those disclosures with reduced concerns that they will be targeted by class actions in instances where they have acted without knowledge, recklessness or negligence. The first temporary instrument was made in May 2020 and was extended in September 2020 for an additional six months to March 2021. Schedule 2 makes permanent the introduction of a fault element following on from the two temporary instruments.

The reforms to these continuous disclosure laws were reviewed at length by two committees, or three different committees really—the Parliamentary Joint Committee on Corporations and Financial Services, the Economics Legislation Committee and the Economics References Committee. Schedule 2 actually implements recommendation 29 of the original Parliamentary Joint Committee on Corporations and Financial Services report. That committee conducted a number of public hearings over a seven-month period and received over 100 submissions. The changes to continuous disclosure reduced the threat to companies and their officers of being subject to opportunistic class action. The changes do not change the legal duty for companies to disclose information to the market that is material or price sensitive, and they do not, Senator McKim, amend the standard for criminal prosecution or the standard at which ASIC can issue an infringement notice or undertake non-civil penalty action.

Just briefly in winding up, I want to read a couple of statements from the Australian Institute of Company Directors to the Senate Standing Committees on Economics inquiry into this, because I think they do make a couple of really key points. I don't think anyone in this place would really make the argument that the AICD is a partisan organisation. The AICD, in submitting to that committee, said:

…the proposed amendments, in our view, do not change the obligations on continuous disclosure placed on companies and their officers. Directors who are reckless or negligent in respect of their disclosure obligations or who knowingly seek to breach them will continue, under the proposals, to be subject to the full force of the law, as they should be.

The AICD also pointed to the harm that is being caused by the strict liability basis in the current law, saying:

…in our view, the current class actions regime leads to adverse outcomes for Australian businesses and shareholders. On continuous disclosure, a strict liability approach is not appropriate for obligations that involve time-sensitive and complex judgement calls, and it is currently too easy to launch or to threaten securities class actions for alleged breaches of these strict liability provisions.

That is a very important point, because it's not just about launching class actions. We've heard quoted from those opposite in this place, a number of times, the number of class actions that were launched. It's not just about launching class actions; it is also about threatening class action. It goes to the point that Senator Scarr made so eloquently: the chilling effect that this can have on the positive operation of our continuous disclosure laws. I certainly commend the bill to the chamber.


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