Katy Gallagher (ACT, Australian Labor Party, Shadow Minister for Finance) Share this | Hansard source

The Treasury Laws Amendment (2021 Measures No. 1) Bill contains two measures, one that Labor will support and one that we strongly oppose. Schedule 1 of the bill allows companies to hold virtual annual general meetings and conduct a range of other governance activities using electronic means. This measure was originally put in place at the height of the pandemic last year. With millions of Australians currently in lockdown and the realisation that lockdowns are going to be around until we get vaccinations to a much higher level than currently, this measure is sensible and Labor will support it. The other measure in this bill is a completely different matter. Originally introduced, like the measure in schedule 1, at the height of the pandemic last year, what it does is permanently weaken the continuous disclosure laws.

Let's be clear about what the changes in schedule 2 are about. The continuous disclosure regime was put in place by the Howard government in 2001. It requires companies and directors to disclose publicly any information that was not generally available and that a reasonable person would expect to have a material effect on the price or value of a company's share price. If a company or company director failed to comply with these obligations, they could face a civil penalty action either by shareholders or by the corporate regulator, the Australian Securities and Investments Commission. However, a director was not liable for a civil penalty proceeding from breaching those obligations if he or she took all reasonable steps to ensure that the company complied with its disclosure obligations and, after taking those reasonable steps, believed that the company was complying with its obligations. As the Australian Shareholders Association put it, this regime meant that if there was any failure to keep the market informed, it was simple: 'Don't tell shareholders something material, and the company and its directors were liable.' This gave shareholders more power, because they generally lack 'insider or special interest knowledge'.

COVID has changed a lot of things. Unfortunately, one of the detrimental changes was a watering down of these continuous disclosure obligations. In May last year the Treasurer used—or, maybe more accurately, misused—emergency COVID-19 powers to temporarily weaken these rules. Note the contrast of the Treasurer using the emergency powers to do this but not using them to broaden JobKeeper to cover certain sectors that missed out. As a result of those temporary changes, shareholders who suffer a loss as a result of listed companies or company directors withholding information from them now have to prove that a company or company director had knowledge of, or was reckless or negligent in respect of, whether the information they did not disclose to shareholders would have had a material effect on the price or value of the company's shares. As the explanatory memorandum to the bill states:

Entities and officers will face reduced regulatory costs in complying with the continuous disclosure regime. This will be because they do not face the same level of financial risk where they allegedly fail to comply with the continuous disclosure rules, unless they do so with 'knowledge, recklessness or negligence'. This will reduce the amount of time entities and officers must spend on assurance that they have complied, as well as the legal fees associated with assuring compliance.

In other words, the Treasurer's temporary changes make it easier for company directors to withhold important information from shareholders and harder for shareholders to take action against dodgy directors, and this bill would make that permanent.

This is a serious issue. The continuous disclosure regime protects shareholders, promotes market integrity and, by extension, makes it easier for Australian companies to raise capital. As ASIC has advised the Treasurer, the continuous disclosure regime is:

… a fundamental tenet of our markets and is particularly important during times of market uncertainty and volatility.

It shouldn't be something that is messed around with or treated like an ideological plaything, but that's exactly what is happening here. It's a direct attack on the rights and interests of every shareholder in Australia. From mum-and-dad investors and self-funded retirees to large institutional investors, every single Australian shareholder should be concerned about these changes. Make no mistake: the government is choosing the interests of directors over the interests of shareholders in a company, and Labor won't stand for that.

We know the government backbenchers have been agitating for this change for some time, in some mistaken belief that there is somehow a whole bunch of invalid, vexatious claims being made via class actions. The phrase used is 'opportunistic class actions'. What are these so-called opportunistic or vexatious class actions? According to the large commercial law firm Allens, in 2019 there were 10 shareholder class actions filed in Australia. In 2018 there were about 20 shareholder class actions filed in Australia. In 2017 there were 15, and in 2016 there were fewer than five. These numbers are small, especially when you consider the many tens of thousands of cases that are filed in Australian courts each year. It couldn't be the number of class actions, and surely the government wouldn't be judging the quality of some of the class actions that have taken place under its watch. Surely it doesn't think that the property owners across Australia who got together to sue the government because the Department of Defence allegedly allowed PFAS to contaminate local environments are engaging in these types of class actions, or the victims of the Prime Minister's illegal robodebt scheme, who launched a class action to vindicate their rights, which led to a $1.8 billion settlement, in what Justice Bernard Murphy described as a 'massive failure'.

I'm sure those on the other side will say, 'This is supported by the business community, so why should'—