In this edition of Gilbert + Tobin's Corporate Advisory Update, we focus on key legal developments over the last month that are particularly relevant to in-house counsel.
Climate-related financial disclosure; passed by the Senate and one step away from enactment
On 22 August 2024, the Senate passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill), bringing the highly-anticipated climate-related financial disclosure regime adopted by the Australian Accounting Standards Board one step closer to enactment.
Schedule 4 to the Bill amends the Corporations Act 2001 (Cth) (Corporations Act) to include climate-related financial disclosure as part of a new annual sustainability report, in addition to the existing obligations to prepare annual financial reports under Chapter 2M of the Corporations Act.
The Senate passed the Bill with only minor amendment to Schedule 4 in relation to scenario analysis disclosure requirements. In light of the government’s support for the Bill in the Senate, the Bill as passed by the Senate is likely to be the legislation ultimately enacted when the House of Representatives votes on the Senate amendments. This may be in the House of Representatives’ next Sitting week in September, and certainly within the next few months.
Implementation of the new regime is proposed to occur in a phased manner, with the largest entities being required to submit sustainability reports for their financial years commencing from 1 January 2025.
A recent G+T Insight provides a comprehensive overview of the key elements of the Bill as passed by the Senate (including the Senate amendments). It also discusses other related developments in Australia and internationally, and what businesses can start doing to prepare for developing reporting requirements.
A look at the draft Australian merger review law reforms
The Australian Government has been consulting on its proposed merger reforms, specifically on:
the exposure draft of the Treasury Laws Amendment Bill 2024: Acquisitions (Bill) - consultation closed on 13 August 2024; and
the merger notification thresholds - consultation closes on 20 September 2024.
The proposed changes (which are to commence from 1 January 2026) are complex, substantial and consequential, with broader application than just merger control under the Competition and Consumer Act 2010 (Cth) (CCA) and significant ramifications for advising on competition clearances of deals in Australia.
A recent insight by G+T’s Competition, Consumer + Market Regulation team provides an analysis of the proposed reforms including:
What acquisition must be notified to the ACCC? - including an overview of the proposed notification thresholds;
What are the new penalty provisions and exactly when are they triggered? ;
What is the new test for considering competition impacts and how broadly will this apply ; and
How can parties seek review of ACCC determinations? What information will need to be provided and when?
The G+T Insight also provides a timeframe for implementation and next steps.
The exposure draft has been the subject of substantial responses from the business and legal communities around some of these issues and changes are expected to be made by Treasury before any legislation is finalised.
You can also click here to read G+T ‘s Competition, Consumer + Market Regulation team’s initial thoughts on the exposure draft and implications.
For those who would rather listen than read, a copy of a podcast where senior G+T partners, Elizabeth Avery and Simon Muys, discuss the reforms is here .
'Right to disconnect’ now in force
On Monday 26 August 2024, the ‘right to disconnect’ laws came into force. The reforms were contained in amendments to the Fair Work Act 2009 (Cth) passed in February 2024 in the (Cth). The amendments effectively empower employees working for a business with 15 or more employees to refuse to monitor, read or respond to contact from an employer (or customer or clients) outside their working hours - unless that refusal is unreasonable. Without limiting the matters to take into account, the legislation lists the following factors that must be considered in determining whether refusal is unreasonable:
The reason for the contact. The form of contact and the level of disruption it causes the employee. The extent of the employee’s compensation to perform work outside of their ordinary working hours. The nature of the employee’s role and responsibilities. The employee’s personal circumstances (including family or caring responsibilities). Whether or not the relevant contact is required by law or was for the reason of ‘emergency or a genuine welfare matter’.
The rights will be extended to employees in a small business (of less than 15 employees) from 26 August 2025.
Attempts to resolve a dispute about an employee’s right to disconnect must first be made at the workplace level between the employer and employee and if unresolved, an application may be made by either party to the Fair Work Commission (who may make an order to prevent the employee from continuing to unreasonably refuse to monitor or to stop the employer requiring a response to contact attempts). Any breach of such orders can result in a civil penalty being imposed.
Importantly, employers will not automatically contravene the Fair Work Act by contacting an employee outside of their working hours but would be prohibited from dismissing (or taking other adverse action against) an employee who reasonably refuses to respond to out-of-hours contact.
A G+T Insight from March this year outlines the changes and considerations employers should take into account if they think some level of out-of-hours contact is inevitable. Employers should also ensure they communicate to their employees and ensure expectations on after-hours contact and availability are clearly agreed upon as soon as possible, to mitigate potential disputes over the right to disconnect (and reputational risk).
The G+T Insight also considers other significant reforms to Australian employment law reform introduced by the amending Act including:
defining 'employee' and implications for contractors; new casual employee definition and conversion rights; underpayment changes; protections for gig-workers, road transport workers and contractors; and additional reforms to enterprise bargaining.
New guidance for corporations on preventing foreign bribery
In February this year, the Crimes Legislation Amendment (Combatting Foreign Bribery) Act 20 24 (Cth) was passed. Under the Act, from 8 September 2024, corporations will now be held directly liable for the foreign bribery activities of their employees, external contractors, agents and subsidiaries, unless the company can demonstrate it had “adequate procedures” in place to prevent bribery.
On 28 August 2024, the government published a new guide - Guidance on adequate procedures to prevent the commission of foreign bribery (Guide) to assist corporations to implement effective anti-bribery compliance programs. The new Guide follows consultation earlier this year (and also in February 2020).
The Guide sets out 6 principles (with discussion and case studies) to assist corporations in establishing “adequate procedures”:
fostering a control environment to prevent foreign bribery;
responsibilities of top-level management;
risk assessment;
communication and training;
reporting foreign bribery; and
monitoring and review.
This Guide is not intended to be used as a ‘checkbox’ but rather it outlines elements that could be included in such a program and suggests types of controls that should be considered. The Guide also emphasises that:
the mere existence of anti-bribery controls will not be sufficient to satisfy the “adequate procedures’ defence, and the corporation must also show that the procedures were adequate;
corporations should also consider their obligations under other laws, guidelines or rules, for example under the ASX Listing Rules or the Corporations Act 2001 (Cth);
the obligation to implement controls will be proportionate to the circumstances of the corporation (e.g. scale and location of activities, and the nature and level of risk identified); and
the fact that foreign bribery has occurred does not, in itself, mean that adequate procedures were not in place.
See also the Attorney-General’s media release .
Government publishes response to continuous disclosure review
On 12 August 2024, the Australian Government published its response to the report of the independent review conducted by Dr Kevin Lewis, former Chief Compliance Officer at the ASX, into the amendments that were made to Australia’s continuous disclosure laws by the Treasury Laws Amendment (2021 Measures No.1) Act 2021 (Cth).
The purpose of the review was to consider:
whether the changes are working to support an efficient, effective and well-informed market;
the effect of the changes on the quality and nature of public disclosures by listed companies;
the consistency of Australia’s continuous disclosure regime with those of overseas jurisdictions; and
whether the changes have created barriers to compliance or enforcement.
As an overarching comment, Dr Lewis considered that the two-year review period was not long enough to draw meaningful evidence-based conclusions. However, the government agreed with the following recommendations:
Recommendation 1 - the Corporations Act be amended to remove the requirement for ASIC to prove in civil penalty proceedings for alleged breaches of continuous disclosure laws that the disclosing entity acted knowingly, recklessly or negligently - The government noted that removing this requirement would allow for more enforcement of the regime;
Recommendation 2 - the same requirement be retained for the time being in connection with proceedings by private litigants - The government also noted Dr Lewis’s observation that it should reconsider whether the fault element should be retained for private litigants if in the longer term, there is evidence to show that there has been a negative effect on disclosure standards or practices;
Recommendation 3 - the government consider the effect of the first two recommendations on legislation to implement climate-related financial disclosure - The government considered the implications of the first 2 recommendations while drafting the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 which has been passed by the Senate (see item above); and
Recommendation 4 - the government amend the Corporations Act to address more fully how knowledge, recklessness or negligence can be attributed to an entity - The government agreed to amend the Corporations Act to expressly provide how state of mind can be attributed to the entity within the continuous disclosure regime and, during implementation, will consider the appropriate model for attribution be extended to the civil liability regime.
The government noted it will consider the following remaining two recommendations at a later time when the opportunity arises:
Recommendation 5 - if the government rejects Recommendation 1 and/or accepts Recommendation 2, it should consider whether the acting knowingly, recklessly or negligently requirement should attach to the determination of whether the relevant information should have been disclosed to the market, rather than to the determination of whether the relevant information was market sensitive; and
Recommendation 6 - the government should also consider whether sections 674 and 675 of the Corporations Act should be amended to specify the applicable physical and fault elements.
Australia’s whole-of-ecosystem approach to combatting the scourge of scams
Last week was Scam Awareness Week 2024. Via this year’s theme, ‘share a story, stop a scam’, the Australian Government and the National Anti-Scam Centre (NASC) are encouraging us to overcome any shame associated with being a victim and share our stories to help others identify, avoid, report, and recover from scams. As scams become increasingly sophisticated and endemic, Australia has adopted a whole-of-ecosystem approach involving collaboration between Government, regulators, industry and consumer groups to combat the scourge of scams.
A recent G+T Insight outlines the latest developments of this this whole-of-ecosystem approach including on:
ASIC Report 790 Anti-scam practices of banks outside the four major banks;
the proposed mandatory industry scam code framework ;
the NASC (which was established in July 2023); and
Scam Safe Accord (a comprehensive set of anti-scam measures announced by the Australian Banking Association and the Customer Owned Banking Association to be implemented across the banking industry).
It also examines the UK’s mandatory reimbursement model and the prospects of a similar model being introduced in Australia.
Regulatory Rumblings - Quarterly Update July 2024
On 9 August 2024, G+T ‘s Disputes + Investigations Team published its first Regulatory Rumblings - a quarterly round-up of the key enforcement developments and updates that ASIC-regulated entities and individuals need to know about, packaged in a five-minute read.
This edition covers the following topics:
Combatting greenwashing remains a key priority : ASIC makes clear it remains committed to combatting greenwashing with successful cases in the Federal Court against Mercer and Active Super and an infringement notice against Fertoz Limited.
Cyber, AI + Technology : a landmark Federal Court decision relived Block Earner from liability to pay a penalty, despite ASIC successfully establishing Corporations Act contraventions; and the first judgement relating to a non-cash payment facility involving crypto assets, found that BPS had engaged in unlicensed conduct when offering the "Qoin Wallet" to consumers.
Accountability and FAR : with the Financial Accountability Regime (FAR) now in place for authorised deposit-taking institutions and ASIC having released its FAR information package for the insurance and superannuation industries on 11 July, accountability is squarely in the spotlight. Against that background, the update considers what action ASIC has announced for directors in this quarter; and
What else did I miss? ASIC v Noumi Ltd lead to a surprising decision on the use of ASIC’s Voluntary Disclosure Agreements; and take note if the design and distribution obligations apply to you, with two judgments finding Firstmac and American Express both contravened their DDO obligations.
The final frontier - the ACCC’s final Digital Platform Services Inquiry report
On 25 July 2024, the ACCC released the issues paper for its tenth and final report of the Digital Platform Services Inquiry. Submissions closed on 23 August 2024 and the ACCC is due to provide the final report by 31 March 2025.
The final report will focus on three topics:
recent international developments in markets for digital platform services and their impact on competition and consumers
major developments and key trends in certain markets for digital platform services
potential and emerging competition and consumer issues that relate to digital platform services.
A recent G+T insight provides more details.
NSW creates new industrial manslaughter offence
On 20 June 2024, the NSW Parliament passed the Work Health and Safety Amendment (Industrial Manslaughter) Act 2024 (NSW). The Act introduces a new offence of industrial manslaughter into the Work Health and Safety Act 2011 (NSW) (WHS Act) applicable to persons conducting a business or undertaking (PCBUs) and individuals in respect of workplace deaths involving gross negligence. The new offence will come into force on a day to be proclaimed.
The amendments do not change the existing duties of individuals and PCBUs under the WHS Act. However, the significant penalties that apply to a conviction for industrial manslaughter heighten the importance of taking a proactive approach to meeting those duties.
A recent insight by G+T’s Employment team considers the elements on the new offence, the changes to the WHS Act and some recommendations for PCBUs and officers
Federal Court finds PayPal used unfair contract terms
In ASIC v PayPal Australia Ltd Limited [2024] FCA 762 , the Federal Court of Australia declared a term used by PayPal in its standard form contracts with small businesses was an unfair term within the meaning of s 12BG(1) of the ASIC Act. Moshinsky J held that the term (Fee Error Term) was unfair because it permitted PayPal to retain erroneously charged fees to small businesses where the small business did not notify PayPal of the erroneous fee charge within 60 days of the fee appearing on its account statement.
Justice Moshinsky declared the Fee Error Term void and ordered that PayPal be restrained from applying, relying on or enforcing this term in its contracts. No penalties were imposed as the relevant period was only up to 7 November 2023 because PayPal voluntarily removed the term from 8 November 2023, the day before the unfair contract terms regime was reformed on 9 November 2023 to attract substantial penalties for unfair contract terms. PayPal agreed that the term was unfair and consented to the declarations.
In reaching his findings, Justice Moshinsky found that:
the small businesses were not placed in a position where they were able to manage the risk of incorrect charging or overcharging (PayPal had the necessary information to do this);
the burden that the Fee Error Term imposed on the small businesses was not matched by a corresponding right for the benefit of the small businesses or a corresponding duty on PayPal;
PayPal did not seek to rebut the presumption in s 12BG(4) of the ASIC Act that the term is not reasonably necessary to protect the legitimate interests of PayPal; and
the Fee Error Term would have caused detriment to the small businesses if PayPal had relied on it.
Federal Court finds iSignthis Ltd breached its disclosure obligations and former managing director/CEO breached directors’ duties
On 21 June 2024, the Federal Court of Australia published McEvoy J’s reasons for his Honour’s decision that iSignthis Limited (iSignthis) had contravened the Corporations Act 2001 (Cth) (Corporations Act) by failing to disclose certain financial information from 2018 to 2020. His Honour also found the former managing director and CEO of iSignthis, Mr Nickolas John Karantzis, had breached the Corporations Act by failing to ensure that information given to the ASX was not false or misleading and had also breached his directors’ duties.
His Honour held that iSignthis had:
engaged in misleading and deceptive conduct;
failed to disclose the fact that although it had received $3 million in revenue, it had also incurred $2.85 million in one-off costs; and
failed to disclose VISA’s reasons for terminating its relationship with iSignthis.
In relation to Mr Karantzis’ conduct, his Honour found that Mr Karantzis:
failed to exercise his powers and discharge his duties with reasonable care and diligence;
was involved with iSignthis’ breaches of its disclosure obligations; and
failed to take reasonable steps to ensure information given to ASX was not false or misleading.
The Court has made declarations that iSignthis and Mr Karantzis contravened the Corporations Act, and will consider whether to impose pecuniary penalties at a subsequent hearing. The case is a salient reminder of directors’ potential exposure in the event of a failure to comply with continuous disclosure obligations in the Listing Rules.
See also ASIC media release .