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Permanent continuous disclosure reforms and temporary relief permitting electronic communications approved

Corporate News - 12 August 2021

In addition to providing relief permitting electronic meetings as summarised in our article yesterday, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 (Bill) passed earlier this week by Parliament also provides temporary relief permitting electronic communications as well as permanent changes to the continuous disclosure obligations.

Electronic execution

Once the Bill is given Royal Assent, until 1 April 2022:

  •  All documents executed by a company under section 127 of the existing law (including deeds) can be executed electronically provided that the method of electronic execution is reliable and appropriate for the purposes; identifies the person and intention to sign; and counterparts include the entire contents of the document. 
  • Documents executed with a seal will be able to be executed and witnessed electronically, with the witness able to use technology (e.g. videoconferencing) to observe the fixing of the seal and no requirement for the witnesses to sign the same document as the one to which the seal was affixed. That is, witnesses will be able to sign and witness documents executed with a seal by:
    • observing the fixing of the seal on the document using technology;
    • signing (electronically or physically) the document or a full copy of the document; and
    • annotating the document with a statement confirming that they have observed the fixing of the seal using electronic means.
Continuous disclosure

Interestingly, despite a number of challenges, Parliament has now also approved permanent changes to the continuous disclosure provisions. As highlighted in our article last year, the changes modify the circumstances in which non-disclosure gives rise to liability. Under the amendments, companies and their officers will only be liable for civil penalty proceedings where the entity ‘knows or is reckless or negligent’ with respect to whether the information would, if it were generally available, have a material effect on the price or value of the securities. In addition, the Corporations Act has been amended to make clear that companies and officers will not be liable for misleading and deceptive conduct where the continuous disclosure obligations have been contravened unless the requisite “fault” element is also proven.
 

The changes are intended to strike the right balance between opportunistic shareholder class actions and ensuring the market is fully informed.  Whilst the changes provide reasonable protection to companies where failures to disclosure information in a timely way do not involve knowledge, recklessness or negligence, companies and their directors are still obliged to conduct rigorous and careful investigations and due diligence in order to properly ensure that any disclosures made do not breach the continuous disclosure obligations under both the Corporations Act and the ASX Listing Rules. In this regard, we have seen ASIC maintain a close eye on suspected misleading statements throughout the COVID pandemic and ASX continues to closely monitor any suspected ramping announcements and will not hesitate to suspend an entity if such an announcement is suspected.

As always, please contact us in our Perth office or Melbourne office if you require further advice on any of these issues by clicking here.


 
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