As lawyers, we will always tell you to watch out for the small print.
So, last week as the nation was transfixed with federal Parliament passing its record-breaking, ideology-defying $130 billion jobs rescue package, something else snuck through.
That something is a piece of ’small print’ giving the Treasurer, at the stroke of his pen, extraordinary new powers to change the Corporations Act.
Ostensibly, these powers are to help businesses deal with regulatory requirements during the unprecedented crisis caused by COVID-19 (coronavirus) – for instance, allowing public company AGMs to be conducted online, rather than in person, in this new world of social distancing.
What’s in the small print
Yet barely 24 hours after the measures were passed, the Australian Financial Review reported that big business lobby groups were already pushing for these emergency powers to be used to amend the Corporations Act to “freeze class actions and provide protections for companies and directors on disclosure”.
According to the AFR, Business Council of Australia CEO Jennifer Westacott wrote to her members just before 5pm on April 9 warning that: “The threat of shareholder class actions over disclosure obligations would place at risk the ability of companies to trade through this uncertain period and come through the other side in good shape to drive the economy”.
Really? I don’t remember hearing that one during the GFC.
Disclosure obligations under corporations law are all about companies being upfront and transparent.
Or, as a Treasury publication way back in 2002 put it (arguably more valid now than then), continuous disclosure “is fundamental to market integrity and investor protection”.
What’s more, Treasury highlights the types of abuses that are prevented by continuous disclosure: “An effective continuous disclosure regime should also minimise the potential for insider trading and other forms of market abuses that may arise as a result of entities withholding or selectively disclosing materially price sensitive information.”
Class actions are still the last best hope for ‘mum and dad’ investors to seek redress against company directors and companies behaving badly.
But under the cover of the coronavirus crisis, the big end of town is now actively lobbying to strip ordinary Australians of those rights.
Despite the alarm from super funds and investor groups calling this a “legal land grab”, expect the lobbying efforts to continue unabated to exempt directors from their fundamental responsibilities to shareholders and to the market.
And given that Parliament isn’t due to sit for the next four months, the ability to scrutinise any such changes is thwarted.
Similar concerns have been raised at a state level, as the NSW government uses its COVID-19 emergency powers to fast-track a spate of controversial development applications.
So, you may ask, what on earth does all this have to do with slowing and defeating the spread of the coronavirus?
Your guess is as good as mine.
Unless, of course, social distancing is morphing into ‘accountability distancing’ for the big end of town.
And that could well leave millions of mum and dad investors not just isolated but stranded financially.
Nick Xenophon is a partner of Sydney-based law firm Xenophon Davis and former independent South Australian senator.