Continuous disclosure obligations applicable to shareholder class action claims have been the subject of much debate in Australia in recent years. Recent amendments to the continuous disclosure provisions of the Corporations Act 2001 (Cth) are intended to reduce opportunistic shareholder class actions being bought in the challenging COVID-19 environment. However, these changes are only temporary. The form of the continuous disclosure regime beyond November 2020 could well be informed by a comparison with the UK and its disclosure provisions.
As discussed in our earlier briefing, the amendments in Corporations (Coronavirus Economic Response) Determination (No. 2) 2020, provide some temporary relief until 26 November 2020. By modifying the circumstances in which non-disclosure can give rise to liability, the amendments are intended to reduce the risk of opportunistic litigation arising from COVID-19 and to enable companies to more confidently provide guidance to the market during the crisis. The amendments introduce a new fault standard, and arguably bring Australia closer in line with the disclosure regimes in other common law jurisdictions such as the UK.
Once the temporary measures come to an end, a critical question will be whether the modified fault standard has achieved a better policy balance between investor protection via private right of action and discouraging opportunistic shareholder class actions.
This question may not be answerable given the limited contours of the temporary measures. But it will certainly fuel policy debate. Should the continuous disclosure regime revert back to its previous form? Will the temporary measures be extended, particularly given the ongoing challenges in managing further waves? Will the temporary measures be made permanent, with or without adjustments, or in combination with other changes? The Federal Government may be well be influenced by comparing the Australian framework with approaches in the UK and other jurisdictions.
In a recently published article in the Law Society Journal, partners Christine Tran and Harry Edwards compare and contrast the fault elements in the UK and (temporary) Australian regimes applicable to shareholder class action claims.
The article can be accessed at https://lsj.com.au/articles/comparing-the-new-fault-standard-in-australian-uk-shareholder-class-actions/.