ASIC updates guidance on continuous disclosure
In a recent Compliance Update no. 12/20, the Australian Securities Exchange Limited (ASX) released updated guidance on Guidance Note 8 (GN 8) - Continuous Disclosure.
We detail the Guidance Note changes and consider the case of ASIC v Big Star Energy Limited (No 3)  FCA 1442 (ASIC v Big Star) as an important reminder to directors about their liability with their company’s continuous disclosure obligations.
The update to GN 8 includes substantial enhancements to the advice on earnings guidance and earning surprises. Importantly, the new guidance provides that where an entity does not have published earnings guidance on foot for the current reporting period and it is covered by sell-side analysts, ASX recommends that the entity consider notifying the market of a potential earnings surprise if and when it expects there to be a 15% or greater difference between its actual or projected earnings.
GN 8 also specifies that ASX expects entities in these circumstances to provide their best estimate of the market’s expectations for their earnings.
Amongst the changes in GN 8, the ASX highlighted the recent decision in ASIC v Big Star Energy Limited (No 3)  FCA 1442.
On 9 October 2020, the Federal Court in ASIC v Big Star examined the continuous disclosure obligations under the Corporations Act 2001 (Cth) (Corporations Act) after a contested hearing and provided insight into directors’ accessorial liability for a company’s breach of its disclosure obligations.
In this case, the Federal Court held that the listed entity breached ASX Listing Rule 3.1 and section 674(2) of the Corporations Act by announcing the sale of a significant asset without disclosing:
The transaction ultimately failed to complete. The Court specifically rejected an argument by the entity that because the purchase was for cash consideration, the identity of the purchaser was not material.
The key takeaways from ASIC v Big Star are:
It is important that company directors are aware of their liability in relation to their company’s ongoing disclosure obligations to avoid a breach under the Corporations Act. If you require assistance with understanding any of the matters raised in the most recent Compliance Update or Disclosure Obligations under the Corporations Act, please contact us.