The Corporations (Coronavirus Economic Response) Determination (No 2) 2020 was enacted on the 26 May 2020 under the Corporations Act 2001 (Cth) to be in place for 6 months. The purpose of the determination is to lessen the threat to directors of class actions by temporarily relaxing the obligations to disclose information. The Treasurer, Josh Frydenberg, has explained that directors are now only liable for predictions that are inaccurate if they “know or are reckless or negligent as to whether certain information will have a material effect on the price or value of the entity’s enhanced disclosure securities”. The changes propose to ensure that investors continue to receive necessary information whilst also providing protection for directors against civil proceedings. Without the temporary changes it was feared that directors would be less eager to make forecasts of future profits and earnings because of a fear of civil actions being brought against them. Therefore it is expected that the changes will allow directors to guide the market more confidently throughout the Covid-19 crisis. Civil proceedings under the new test can only be brought whilst the determination is in effect (from 26 May 2020 until 26 November 2020). It has been acknowledged that this is potentially the first step in greater reforms in this area, which will be the focus of an upcoming parliamentary inquiry into class actions. Contact M+E for further information about the legislative changes.
