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In a matter of months, COVID-19 has upended the Australian economy. Australia’s borders have closed to non-citizens, large indoor gatherings are banned, and increasing numbers of people are now forced to work from home. Amidst the economic fallout inflicted by COVID-19, ASX-listed companies’ fortunes are rapidly changing. As a director of a listed company, it is now more important than ever to remain mindful of your obligations to update the ASX as soon as you become aware of information that may impact the share price of your company. This article will explain what your corporate disclosure obligations are in light of the COVID-19 pandemic.

Immediate Notice of Material Information 

Under rule 3.1 of the ASX Listing Rules, you must immediately disclose any information that might affect your company’s share price to the ASX. While this does not mean you need to act instantaneously, you do need to act as quickly as possible without postponing the announcement to a later time.

In the context of COVID-19, ‘information’ can include an opinion or intention. It does not need to be financial information or even measurable in financial terms. Rather, it has to be information that a reasonable person would expect to have a material effect on your company’s share price. If you believe that the information is not market sensitive, but it actually is, you will still be in breach of the rules.

Are There Any Exemptions to the Duty to Disclose?

Rule 3.1A sets out some types of market-sensitive information that are exempt from this duty to disclose. For such information to be exempt, it must fit into one of the following categories:

  • it would be against the law to disclose the information;
  • it relates to an incomplete proposal or negotiation;
  • the information is for internal management purposes
  • it is a ‘supposition’ or is ‘insufficiently definite’ to warrant disclosure; or
  • the information is a trade secret.

For the information to be exempt, it also must be:

  • confidential; and
  • something that a reasonable person would not expect to be disclosed. 

What If I am Unsure if I Should Disclose Certain Information?

When deciding whether or not to disclose certain information, you should consider whether:

  • knowing this information would impact your choice to buy or sell shares in the company at its current price; or
  • you would feel vulnerable to a claim of insider training if you were to buy or sell shares in the company at its current price, knowing the information was not disclosed.

The ASX will approach the question by looking at the effect the information had on the company’s share price once it was announced. If the company’s share price changed by: 

  • 10% or more, they will consider it market sensitive; 
  • 5 – 10%, they may consider it market sensitive; 
  • 5% or less, they will not consider the information to be market sensitive.

Examples of COVID-19 Related Information

The impact of COVID-19 on your business may create situations which you will need to disclose. Some recent examples of when this will be relevant includes when:

  • Ltd announced that it was withdrawing its outlook guidance of growth in revenue from its FY20 half-year results in response to the recent escalation of COVID-19. This is because it was impossible to predict the impact on the buying and selling of cars on their platform in Australia;
  • Wellington International Airport announced that Standard & Poors had placed their ratings on CreditWatch Negative due to the restriction in international and domestic air travel;
  • Wesfarmers Ltd announced the introduction of measures to protect their retail staff from COVID-19, the impact of the virus on sales of particular product types, and increased operational costs due to the recent decline in the Australian dollar’s value; and
  • Marley Spoon AG announced that the significant change to people’s eating habits caused by the COVID-19 outbreak had caused a huge increase in demand for their home-delivered meal kits.

What Are the Consequences for Failing to Disclose?

If the ASX suspects that you have breached your duty of continuous disclosure, they will refer your business to ASIC with details of the breach. When deciding whether to refer to ASIC, the ASX will use the percentages test outlined above.

The ASX can also:

  • direct you to provide specific information for them to release to the market;
  • censure you for breaching the listing rules;
  • suspend your company’s admission to the ASX until a matter has been dealt with; and
  • terminate your company’s admission to the ASX.

Key Takeaways

As a director of a listed company, you are no doubt considering the impact of COVID-19 on your company. If you have not done so already, it may be prudent to release an announcement to the market outlining:

  • measures you are taking to mitigate the virus’ impact on your company;
  • any changes or updates to a previously released earnings guidance; or
  • impacts the virus or its repercussions have had on supply or demand for your company’s goods and services.

If you have any questions about how to respond to the evolving COVID-19 outbreak as a company director, contact LegalVision’s corporate lawyers on 1300 544 755 or fill out the form on this page.


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