COVID-19: Government eases continuous disclosure rules for six months

The Federal Government is easing continuous disclosure rules for six months to help listed entities deal with the uncertainty cause by COVID-19.

The Federal Government is temporarily easing continuous disclosure rules that apply to companies and their officers so that they can more confidently provide guidance to the market during the coronavirus crisis.

Under the Corporations Act, listed entities are required to comply with the disclosure obligations set out in market listing rules. For six months from 26 May, companies and their officers will only be liable for failures to comply if there has been “knowledge, recklessness or negligence” with respect to updates on price sensitive information.

The change is in part aimed at heading off opportunistic class actions.

“The heightened level of uncertainty around companies’ future prospects as a result of the crisis also exposes companies to the threat of opportunistic class actions for allegedly falling foul of their continuous disclosure obligations if their forecasts are found to be inaccurate,” Treasurer Josh Frydenberg said in a press release.

“In response, companies may hold back from making forecasts of future earnings or other forward-looking estimates, limiting the amount of information available to investors during this period.”

The AICD had in April proposed a temporary safe harbour to assist companies in dealing with the continuous disclosure challenges posed by COVID-19 and has applauded the government action.

“This is a critical step in acknowledging the challenges facing the business community to rebuild in the wake of COVID-19,” AICD CEO and Managing Director Angus Armour said.

“This measure allows directors to provide greater disclosure in this uncertain environment at the same time as it maintains measures to discipline irresponsible companies to protect the community.”