Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

This bill, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, extends the operation of certain measures that were put in place at the height of the COVID-19 economic recession, changes that concern the Corporations Law. Schedule 1 of the bill allows companies to hold virtual annual general meetings and to execute a range of other governance activities using electronic means until 16 September 2021. Without the passage of this bill, this measure would otherwise expire on 21 March 2021. This measure and other measures reduce the ability of shareholders to hold company directors to account through questions and votes at physical AGMs; however, as COVID-19 border restrictions may continue through 2021—though we all hope that will not be the case—Labor sees the sense in this measure continuing.

Schedule 2 is an entirely different matter. Schedule 2 extends a COVID-19 measure which will permanently weaken Australia's continuous disclosure laws and the misleading-and-deceptive-conduct provisions. We opposed that provision, which was put into place by regulation during the height of the COVID-19 recession, and we will be opposing it again. Under the pre-COVID continuous disclosure regime, which was introduced by the Howard government in 2001, companies and directors were required to disclose publicly any information that was not generally available and that a reasonable person would expect to have a material effect on the price or value of a company's share price. If a company or company director failed to comply with these obligations, they could face a civil penalty action either by shareholders or by the corporate regulator, the Australian Securities and Investments Commission. However, a director was not liable for a civil penalty proceeding for breaching those obligations if he or she took all reasonable steps to ensure that the company complied with its disclosure obligations and, after taking those reasonable steps, believed that the company was complying with its obligations.

Under the temporary COVID-19 regime, which schedule 2 would make permanent, companies and directors that fail to disclose price-sensitive information, either at all or in a timely fashion, are only liable to shareholders for that failure if the company or director acted with knowledge, recklessness or negligence. That means these changes would make it easier for companies and directors to get away with failing to provide price-sensitive information to the market. As the government's explanatory memorandum puts it, they would reduce the amount of time entities and officers must spend on assurance that they have complied with the continuous disclosure and misleading and deceptive conduct laws. In other words, the changes at schedule 2 would make it easier for companies and directors to get away with withholding information from, or providing misleading information to, the market and shareholders.

The only reason the government has given for making the changes in schedule 2 is the asserted need to protect Australian companies and directors from the risk of opportunistic class actions. The changes in schedule 2 would put the interests of individual company directors above the interests of mum-and-dad investors. This is an important point. Every member of this House would remember the campaign that the coalition waged in the lead-up to the last election, where they alleged that they were championing the interests of mum-and-dad investors. It now appears that the very government that purported to champion these interests has dropped mum-and-dad investors like a hot, mouldy potato. These measures are anti shareholder—or, more accurately, anti small shareholders—and pro director. Large institutional investors always have an advantage. They have many means at their disposal, such as large research units and ongoing investor briefings, to interrogate company directors and hold them and their companies to account. Small mum-and-dad investors don't. It is for this very reason that small mum-and-dad investors are reliant on these continuous disclosure obligations. Our great concern is that these proposed changes will ensure that we have, built into our company law, a 'don't ask, don't tell' culture. It is absolutely against the interests of small mum-and-dad investors, and this schedule to the bill should be rejected.

By way of background, both of these measures were introduced by the government as temporary measures. We were deeply concerned by this second measure in schedule 2, and we opposed it at the time. If ever there was an argument for putting this in place as a temporary measure, there is certainly no argument for making it permanent. The government is quite simply choosing the interests of directors over the interests of shareholders in a company. That is untenable, and we will not be supporting it. We know the government backbenchers have been agitating for this change for some time, in some mistaken belief that there is somehow a whole bunch of invalid, vexatious claims being made via class actions. There is no evidence at all to substantiate this claim. What there is evidence of is that this change will harm small mum-and-dad investors. The government, I'm sure, will say in its contributions that it has the support of the business community. That is simply not true. It is true that the Business Council of Australia—that is, big business—is going to support it. Of course the Australian Institute of Company Directors is going to support it because the government is choosing the interests of directors over shareholders. But not all business organisations are supporting it. A 2020 survey of 195 senior company executives, conducted by the law firm King & Wood Mallesons, found that only 21.5 per cent of executives thought that the temporary changes to continuous disclosure laws should be made permanent. That is to say that nearly 80 per cent of company executives said that it was a bad idea. That was only one year ago. I'm sure that, if asked today, those same company directors would say it's still a bad idea and that it should be rejected.

There is also strong opposition from the Australian Shareholders Association, who described this new bill as 'a curate's egg'. They have concerns but understand that there is some merit in the virtual AGMs. The chair of the Australian Shareholders Association, Mr Alan Goldin, had this to say:

I personally dislike the virtual AGM that allows chairmen to effectively dodge any real questions and offer any answer they like as there is no comeback… Until 15 September …

Then we return to the real world of directors and management being held accountable once a year to their owners—

the shareholders. He personally dislikes them but can understand that there is perhaps an argument in favour of them, but he does not support changes to director liabilities and describes them as a 'bad' change, saying:

BAD is the change in continuous disclosure regulations. "Previously if there was any failure to keep the market informed under the current 'Continuous Disclosure' rule, it was a simple black and white situation, don't tell shareholders something material and the Company and its Directors were liable. This was great for shareholders because they do not have insider or special interest knowledge and all they know is what they are told and what they read."

What Mr Goldin is saying, quite simply, is that the existing arrangements are pro shareholders; the government's changes are against the interests of shareholders and they should be rejected. He says—his words, not mine:

So the new instruction to management from Boards could be, if you want to keep some information to yourself or exaggerate a bit just make sure you don't tell me so no one can sue me—

that is, don't ask, don't tell. That is the culture which is going to be legislated for if this bill passes the House. It should be opposed.

Another argument that has been put forward by the government is that, somehow, if this bill passes the House, there will be a reduction in premiums paid for director liability insurance. That was put to the test by the Senate committee which inquired into this bill. The Insurance Council of Australia punted that out of the park. It said there can be no hope that there will be a significant reduction or any significant change in insurance premiums as a result of this change. Evidence from the Insurance Council indicated that a best-case scenario would result in little or no change to the price of directors and officers insurance. In the short to medium term, at best, there would be no change. The government's arguments for doing this, when held up to scrutiny, quite simply dissolve, and for these reasons they should be rejected.

For these reasons, we are moving a second reading amendment in the form that has been circulated in my name. I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) notes that the Government's measures in Schedule 2 of the bill would strip shareholders of their rights to be adequately informed, damage Australia's corporate governance regime, and allow company directors to get away with failing to disclose important information; and

(2) further notes these measures could damage Australian investment and hurt Australian investors and retirees."

I foreshadow that at the third reading stage we will be moving a substantive amendment to separate schedules 1 and 2 of the bill. As we've said, we can support and are willing to support the provisions for extending the arrangements for virtual AGMs; we can see the case for that. But we do not support and will not support the provisions for dissolving or reducing the director liability requirements. With those remarks, I thank the House.

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Emma McBride (Dobell, Australian Labor Party, Shadow Assistant Minister for Mental Health) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

Imagine my shock—imagine everyone else in this chamber's shock—that the Labor Party would oppose efforts which make it deliberately mischievous for litigation funders to be able to turn our court system from one focused on justice to one focused on profit for themselves and for the lawyers that represent them. Imagine my shock when you go through their AEC returns and the same people who benefit from and prey on the misfortune of those with low incomes, the poor and those who have faced challenges also happen to be those who profit from the current law that the Labor Party is seeking to oppose amendment of. Imagine my shock when those same lawyers, those same firms, who take advantage of the misfortune of Australians and profit from it might also be some of the most significant donors to the Australian Labor Party.

Imagine my shock at the motivation of those members opposite, particularly when they sit in this chamber, when they stand in this chamber, and talk about how they worry about a culture of 'don't ask, don't tell' within Australian companies. Yet when the member for Mackellar moved a motion in this chamber this morning, calling out major superannuation funds that choose to keep information secret—not just from their investors, because we know that on the public record they have complained about the secrecy that sits at the heart of these funds, not just from the fund members who invest money in super funds that is then laundered into wholesale funders and who can't get accountability while they pay their fund managers fat bonuses, but imagine when they won't even answer questions to this parliament.

If you want to see 'don't ask, don't tell', just look at what happens in the superannuation industry, where big super actively harvests members' funds for fees and bonuses and then refuses to reveal them to the Australian public. Just look at what happens when fund managers caught up in cases of alleged sexual harassment are boasting to their victims about $36 million bonuses for themselves—the silence on the other side of this chamber. It's not just the bonuses that they brag about in bars late at night but the publicly reported $13 million bonuses collected by single fund managers from Australia's retirement savings.

When this parliament and the committees that represent it ask questions—not just about the bonuses but their structures—it's not just that they refuse to answer, engaging in their own 'don't ask, don't tell' policy, but also that members of the Labor Party, on the other side of this chamber, run interference to try to help block the release. And then they come into this chamber, where we are proposing sensible laws to stop the abuse of people who try to use courts for profit and not for justice, and attack sensible legislation which would enhance the opportunity for all Australians to be treated fairly and with dignity. That is the tragedy of the modus operandi of the opposition and the legislation and how they view it. It is not about what they think they can do to empower the Australian people; it is what they can do to empower themselves. The Australian people see this. Deep down, they will not take action unless it helps themselves—at the people of Australia's expense.

The measures in this legislation are very straightforward. As we know, at the start of the COVID-19 pandemic, because we were unable to bring people together for investor meetings and shareholder meetings, we provided a legal vehicle for those meetings to be held virtually and online. And, while this government has a very proud track record of rolling out vaccines, we are not at the end of that journey, and returning to business as normal is not an option. But this is only a temporary measure, and it's a temporary measure not just because we want Australians to come together but because we know that, when the channel through which people can communicate is limited, it favours the boards against investors. We want to empower investors and Australians to make their decisions and hold boards accountable. Even with this legislation, it will still be greater than for superannuants, and investors in Australian superannuation funds can hold many of their funds accountable because they report not to their members—despite the best efforts of this government and legislation—and not to independent directors but, ultimately, to themselves. Then, when this parliament asks basic questions to hold them accountable for the law that compels Australians to give them money, they refuse to answer them. We want to make sure that Australians can hold their corporates to account, but we have to make sure that we can operate in an environment throughout the COVID-19 pandemic so that measures can be appropriately taken.

The other provisions in this legislation relate to continuous disclosure rules, which are not viable for civil penalty proceedings unless companies have acted with knowledge, recklessness or negligence in failing to update the market. The reason for them is simple. We have seen how provisions which have been put in acts which are designed to improve accountability for companies have been used and abused recklessly by law firms and investors who want to turn our system of justice into a system for profit. Let's not mistake what happens when they manipulate our court system for their own ends. It comes at the expense of vulnerable Australians who have a legitimate case for a class action. When they win that case, the money is taken by law firms who seek to use it for their own profit motive.

Mr Gosling interjecting—

Members, including the member for Solomon on the other side of this chamber, claim that they're standing up for workers and standing up for vulnerable Australians, but all they see is an opportunity to enhance the situation for themselves. Even worse than that, those same firms then take that money and donate it to create laws and to foster laws to protect themselves and their interests, and to harvest and to profit from the most vulnerable Australians. It's not for accountability; it's for profit, so that they can pay their bonuses. And then we see in this chamber the member for Whitlam and, I'm sure, other members who will follow him opposing legislation because they know that it will undermine the revenue streams that their paymasters in the union movement and in the law firms take at the expense of vulnerable Australians.

We see this time and time again. It is a pattern of behaviour from the modern Australian Labor Party. They use the law to buffer the profits of financial interests associated with them and then scream, 'Outrage!' when people seek to inquire how those funds somehow seamlessly transfer money to the campaigns and the activities of the allies of the Labor Party on the other side of this chamber. Of course, in a free society, people should follow the law, but that doesn't excuse the unethical conduct of those opposite. It also means that people on this side of this chamber have a responsibility to call it out. Those opposite should support these changes in law because they're good changes. They should support these changes in law because they enhance the power of Australians to be treated fairly and with decency. More critically, they stop the use and manipulation of courts for profit over justice. That is what courts should be used for—not political gains and not commercial profit, but justice. And we're going to call an end to that racket right here.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for the Republic) Share this | Link to this | Hansard source

This bill, the Treasury Laws Amendment (2021 Measures No. 1) Bill 2021, is about undermining democracy and undermining transparency and accountability for Australian shareholders in companies—it's as simple as that. This bill is undoing a law that was put in place by the Howard government to provide more transparency, more accountability and more democracy, so we got better decisions from boards and more accountability to shareholders in the past. Yet this government wants to undermine that in the name of class actions and insurance costs for companies around directors' liability increasing, when there is simply no evidence of that at all. So, once again, what appears to be occurring here is that an ideologically driven campaign from the backbench of the government has forced the minister, the Treasurer, into amending a very important law that provides democracy and accountability and information for Australian shareholders.

What this bill is doing is undermining the viability of and the information and accountability that goes to mum and dad investors who are shareholders in companies, to people who run their own self-managed superannuation funds—self-funded retirees. They're doing it tough enough as it is under this government. Since COVID hit, interest rates have been so low they're not making returns on their investments at all. Self-funded retirees are doing it tough. They've been forgotten about by this government in all of the support packages that have been put together. Yet the government wants to make it more difficult for self-funded retirees to get information and hold boards to account for those companies that they've invested in. Well, that is undermining democracy in Australian companies.

Schedule 1 of this bill allows for companies to hold virtual annual general meetings and execute a range of other governance activities using electronic means until 16 September 2021. This is a temporary measure that was put in place by the government during COVID and which Labor supported. It was due to expire on 21 March 2021. But, given that COVID is continuing and given that our borders sometimes won't be open, Labor will be supporting this particular measure on a temporary basis.

However, we are worried about the reduction in transparency and accountability, particularly around shareholders being able to ask questions and have votes on issues with boards at annual general meetings. The Senate report into this bill quotes the International Corporate Governance Network, which observed:

… we encourage regulators to ensure that shareholder rights are not infringed so as not to restrict their ability to hold companies properly to account. Certain minimum shareholder rights should be guaranteed to allow for robust challenge of boards and management through interactive and unmoderated questioning or statements made by shareholders to have meaningful dialogue on contentious proposals.

So it is important, if this measure is passed, that there is a mechanism, through those online networks, for shareholders to continue to ask those important questions when it comes to annual general meetings and holding boards to account. So Labor supports this, on the basis that it is a temporary measure to get us through COVID.

Schedule 2 is the real controversy in this bill. Schedule 2 undermines what are known as the continuous disclosure obligations, which exist in corporate law—obligations from boards to shareholders about material information and when it was discovered. These are laws that were put in place by the Howard government, introduced in 2001. Companies and company directors were required to disclose publicly any information that was not generally available that a reasonable person would expect to have a material effect on the price or value of a company share price. If a company or a company director failed to comply with those obligations, they could face a civil penalty action either by shareholders or by ASIC. However, a director was not liable for a civil penalty for breaching those obligations if he or she took all reasonable steps to ensure that the company complied with its disclosure obligations and, after taking those reasonable steps, believed that the company was complying with its obligations.

Under the temporary COVID regime, which schedule 2 would make permanent, companies and directors that fail to disclose price-sensitive information, either at all or in a timely fashion, are only liable to shareholders for that failure if the company or directors acted with 'knowledge, recklessness or negligence', all of which can be very, very difficult to establish. So what we are seeing here is a watering down of those laws put in place by the Howard government to ensure that directors couldn't dud their shareholders by not disclosing vital information which could materially affect the price and the value of shares in the market. What shareholder in a company, what mum and dad investor or what self-managed super fund operator wouldn't want to know about information that may materially affect the share price of the company that they are invested in as quickly as possible? Yet this particular change undermines the strength of that guarantee, written into law and existing in Australian law since 2001, for Australian shareholders. So in that respect they are undermining the democracy and the information and transparency and accountability, that is so important to shareholders around the operation of their companies, and the material information which all shareholders have the right to know about.

In the Senate inquiry into this particular bill, there was deep concern that was presented by a number of submitters—most notably, the Australian Shareholders' Association. The representative body of the group of Australian shareholders expressed deep reservations on the regressive nature of this reform. But it says everything about the operation of this government and the ideological campaign that's been run by backbenchers around this issue that this government completely ignored the wishes of shareholders and instead, once again, sided with their mates on big bonuses in big companies—the directors of these companies.

I want to read to you some of the evidence that was presented to the committee, and some of that is deep concern from shareholders and legal practitioners about schedule 2. Their view is that it is 'unnecessary' and 'turns back the clock … leaving shareholders at risk of a return to the darker days of the distress of high legal costs to individuals or groups of shareholders pursuing redress'. The Australian Council of Superannuation Investors said:

If shareholders are required to prove a subjective standard (the mental state of the disclosing entity) rather than the current objective standard of materiality, this will make it more difficult for shareholders to hold companies to account.

The proposed changes to the continuous disclosure rules could therefore adversely affect the balance between companies and investors, and work to undermine market integrity.

And that's important: they could undermine integrity in the operation of Australian companies. Let's not forget that those opposite don't care about integrity. They don't care about integrity at all, in everything that they do. We've seen that in a host of policy areas in this parliament, whether it goes to sports rorts, whether it goes to the operation of committees or whether it goes to the way that they've handled the allegations that have been raised by Ms Higgins. Integrity doesn't matter at all to those in this place—

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

The minister, on a point of order?

Luke Howarth (Petrie, Liberal Party, Assistant Minister for Youth and Employment Services) Share this | Link to this | Hansard source

The member is not being relevant to the bill at all. I'd ask that he refer to the bill and bring it back to the bill.

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

The member for Kingsford Smith may wish to return to the bill.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for the Republic) Share this | Link to this | Hansard source

I am being entirely relevant to this bill, because it's been identified by a number of submitters to the Senate inquiry into this that the issue of integrity is an important one and that this bill will undermine the operation of integrity when it comes to transparency and accountability for shareholders. I'm simply making the point that, when it comes to integrity, this government has poor form—most notably in the fact that it's been promising a National Integrity Commission for well over three years now, and what have we got? Nothing. It's yet to present anything to this parliament.

One of the arguments that this government makes in respect of the undermining of the continuous disclosure obligations is the issue around insurance. It's their belief that if these laws are passed there will be insurance savings for companies throughout Australia. They often point—and the member for Goldstein pointed to this—to the notion of class actions. The evidence points to the fact that, again, this is another example of the coalition astroturfing, making something up when it's simply not an issue, because less than one per cent of actions in the Federal Court are shareholder class actions. It is well under one per cent. That means that well over 99 per cent of actions in the Federal Court don't relate to this issue. So how can it be said that there's a problem if it's less than one per cent?

The other point is that this notion that there will be savings in insurance that come from this bill was completely blown out of the park by none other than the Insurance Council of Australia when they presented their evidence to the Senate committee. They said that, in a best-case scenario, this would result in little or no changes to the price of directors and officers insurance. In short, in the short to medium term, at best there will be little or no change to D&O premiums. That's the view of the Insurance Council, the representatives of insurers: that this would make very little difference to that issue of savings around insurance. So that issue is again blown out of the water and is another example of this government astroturfing and trying to make up things that are simply not there.

But we all know that the government backbenchers have been agitating for these changes for some time. Australian shareholders benefit from these strong continuous disclosure laws, and all Australian shareholders will be harmed if these changes get through. The rules don't just protect retail shareholders; they make Australian businesses stronger and more attractive to investors. These changes would put the interests of a small number of company directors above the interests of mum and dad investors, self-funded retirees and large institutional investors. And that's why there is this strong opposition to the change from the Australian Shareholders Association, from certain law firms and from the Australian Council of Superannuation Investors. And it's a matter of public record that ASIC and the ACCC have advised the government that the pre-COVID continuous disclosure and misleading and deceptive conduct provisions should be retained. ASIC, for example, told Treasury that the pre-COVID continuous disclosure laws are a fundamental tenet of our markets and are particularly important during times of market uncertainty and volatility.

So all of the arguments that the government has raised in respect of this bill have been shot down by people who've made submissions to the Senate inquiry into this bill, but most importantly they've been shot down by the representatives of shareholders. That is the representatives of mum and dad shareholders and of self-managed super funds. They're the people that we should be thinking about when we're discussing these laws.

Dave Sharma (Wentworth, Liberal Party) Share this | Link to this | Hansard source

The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 makes two suites of changes to the Corporations Act. Schedule 1, which we've been discussing this evening, extends from 21 March to 15 September this year the expiry date of the temporary relief allowing companies to use technology to meet regulatory requirements to hold meetings such as AGMs, distribute related materials and validly execute and witness documents. Schedule 2 of the bill permanently introduces a fault element for our continuous disclosure laws so that companies and their officers will only be liable for civil penalty proceedings where they have acted with knowledge, recklessness or negligence in failing to update the market with price sensitive information.

Allow me to turn first to schedule 1. This relief was originally introduced on 5 May 2020, using a temporary instrument-making power which was inserted into the Corporations Act as part of the government's response to the coronavirus crisis, and was subsequently extended. While this relief currently expires on 21 March this year, in just under a week's time, the rationale for its introduction remains. COVID-19 continues to cause uncertainty and associated public health orders continue to be introduced from time to time which restrict movement, meetings and large gatherings. It's necessary for the continuation of business that companies be able to plan with certainty, to host meetings and to execute documents without necessarily having to physically meet.

The relief in this bill, the adjustments in the provisions in schedule 1, ensures that companies can get on with business while cooperating with public health orders to ensure that the COVID-19 risk remains abated. Schedule 1 contains enhancements to the temporary relief previously introduced as a result of feedback and consultation. These enhancements ensure, amongst other things, that companies are required to meet the same substantive regulatory standards regardless of whether a physical, virtual or hybrid meeting is held. It allows shareholders to opt in to receive hard copies of meeting related materials. It also allows that whether company officers physically or electronically execute documents, including things such as deeds, via signature or witnessing the application of a company seal, such execution will be valid, which means that the rights and the obligations contained in those documents will remain enforceable. The provisions in schedule 1 also improve the technology and neutrality of other regulatory requirements related to meetings and document execution. These improvements are all consistent with the recommendations of the interim report of the Senate Select Committee on Financial Technology and Regulatory Technology.

In addition, the government is also proposing permanent reforms that will continue to allow companies to electronically sign documents and send meeting related materials electronically to be in place when this temporary extension ends. The government is also proposing to conduct an opt in pilot for hybrid AGMs, or annual general meetings, which will allow shareholders to choose to attend meetings either in person or virtually. This pilot will commence when the extension to the temporary relief ends on 15 September 2021, with the aim of this pilot being to encourage companies and shareholders to engage with technology with a view to considering whether future permanent reforms are needed to allow companies to effectively use technology to engage and interact with their shareholders.

Schedule 2 to this bill will amend our continuous disclosure laws so that companies and their officers will only be liable for civil penalty proceedings where they've acted with knowledge, recklessness or negligence with respect to updates on price sensitive information to the market. What schedule 2 does is make permanent the temporary relief that was introduced by the government in response to the coronavirus crisis on 25 May 2020 and subsequently extended until 22 March 2021. Why are these reforms necessary? I know those opposite disagree with the need for these reforms. What these reforms are intended to do is reduce to the threat of opportunistic class actions enabling businesses to allocate resources to where they're most needed, to improving efficiency, to hiring new workers, to growing, to investing and to make it easier for businesses—and particular company directors—to focus on those decisions that will make it easier for business to grow and create jobs for the economy. These reforms will mean that company directors and senior office holders, rather than spending a disproportionate amount of time taking defensive measures to mitigate the threat of opportunistic class actions brought against them, will now have time to focus on what the proper purpose of the business is, which is growing, producing and employing.

The threat of class actions has also made it more difficult for companies to release forward-looking guidance to the market. Without a high level of protection, companies and company office bearers may choose to withhold forecasts of future earnings or other forward-looking estimates, thereby limiting the amount of information available to investors. This is a long-overdue step in controlling the rise of baseless and costly litigation that mostly benefits for-profit litigation funding groups, most of which are based offshore. As Ashurst's partner Ian Bolster, a leading class-action practitioner, said recently:

Australia has a "class action friendly environment" where the lack of regulation for litigation funders had incentivised the rise of flimsy cases that bully corporations into settling.

Everyone is entitled to their day in court but it shouldn't be a vehicle for funders to profit, it should be a way for people to access justice.

Since class actions first became a reality in Australia in 1991, almost 30 years ago, the amount of class actions has grown dramatically, particularly shareholder class actions. The Australian Law Reform Council noted as well that, of these shareholder class actions, 28 per cent of the litigation proceeds went to funders, 15 per cent went to legal expenses—so almost half of the proceeds are going to litigation funders or the lawyers—and only 55 per cent went to affected shareholders. Federal Court data also shows that, contrary to what the member for Kingsford Smith said earlier, the number of class actions in Australia is actually on the rise quite dramatically; the number of class actions in Australia has tripled over the past 10 years.

If you look at the insurance market for directors and officers liability insurance, you see that the risk is increasing. The standard premium for directors and officers liability insurance rose 75 per cent on average in 2019 and 88 per cent on average in 2018. So what schedule 2 will do is amend our continuous disclosure laws so that companies and their officials will only be liable for civil penalty proceedings where they have acted with knowledge, recklessness or negligence with respect to updates on price-sensitive information to the market. This will not alter the existing administrative penalties regime issued by ASIC, so ASIC can continue to issue infringement notices without proving knowledge of recklessness or negligence. Infringement notices can continue to be used for less serious breaches as a fast and effective regulatory response that is both proportionate and proximate in time to the alleged breach. This standard is also retained for ASIC's other nonpecuniary enforcement tools, such as requiring a disclosure of information to the market or obtaining a court order, which will ensure that the regulator, ASIC, can continue to enforce compliance with the law but without entities facing class actions where they've acted honestly and without negligence.

Schedule 2 also introduces the same standard of liability for misleading and deceptive conduct where an entity or an officer has allegedly failed to provide an update with price-sensitive information to the market. This ensures that those who bring class actions for an alleged failure to update the market must prove that a company or officer has acted with knowledge, recklessness or negligence, whether they bring the action under continuous disclosure or under misleading and deceptive conduct provisions. The introduction of this fault element for private actions will more closely align Australia's continuous disclosure regime with the approach already taken in comparable jurisdictions, including the United States and the United Kingdom.

The threat of class actions has skyrocketed in recent years, and it has made it considerably more difficult for companies to release reliable forward-looking guidance to the market. Without a high level of protection, companies may choose to withhold forecasts or other forward-looking estimates, thereby limiting the amount of information available to investors and lessening the amount of information available to regular shareholders and the market. Raising the liability standards so that companies only face civil penalty actions where they have acted with knowledge, recklessness or negligence will allow companies and their officers to confidently provide guidance to the market without exposing themselves to the risk of opportunistic class actions. Reforming these obligations will also allow businesses to allocate resources towards improving efficiency and output, making it easier for businesses to invest, to create jobs and to ultimately grow the economy, which surely is the goal of all of us here. I commend the bill to the House.

Debate interrupted.