Continuous disclosure: a culture of compliance.(CORPORATE LAW)

* A reminder that ASIC will pursue civil penalties for significant contraventions of the continuous disclosure requirements

* Other potential ramifications of contravening continuous disclosure requirements

* The importance of implementing and maintaining systems to monitor the need to disclose information and of instilling a culture of compliance

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In this article we look further (1) at two decisions regarding the continuous disclosure obligations of companies which provide guidance and a warning to companies regarding the corporate governance mechanisms required to discharge their continuous disclosure obligations.

The decision in the Chemeq case identified a number of factors to be considered by the court in determining the level of penalty for contraventions of the requirements. The Jubilee Mines decision is the first successful claim for damages by a shareholder arising out of a breach of the continuous disclosure obligations.

These decisions are two of a number of recent proceedings indicating an increased focus on the continuous disclosure requirements.

Regulatory framework

The ASX Listing Rules require listed companies to notify the ASX immediately of information that a reasonable person would expect, if it were generally available, to have a material effect on the price of the entity. (3) Section 677 of the Corporations Act (Act) provides some guidance in relation to the materiality and reasonable person elements of the requirement. The provision states that the standard will be met by information which 'would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the securities.' In this respect, French J noted in the Chemeq decision that the continuous disclosure rules not only serve 'the existing shareholders of publicly listed companies, but also the market for shares which includes prospective or potential purchasers of shares'.

The requirement for continuous disclosure is reinforced by s 674 of the Act which provides for civil penalties for contravention of the obligation imposed by the ASX Listing Rules. The maximum penalty which may be imposed by a court against companies for a breach of the continuous disclosure requirements under the Act is …