The government is concerned that shareholder class actions backed by litigation funders may be responsible for unsustainable increases in directors and officers (D&O) liability insurance premiums of up to 250%.
“Disappointing that once again the Labor Party and the Greens have shown their true faces by vehemently opposing our practical, sensible and necessary law reform,” said Mr Frydenberg.
One Nation leader Pauline Hanson initially opposed the bill, saying it would make proof of disclosure ranges “very difficult” and make companies and directors “virtually immune” civil disputes.
However, she later agreed to support on the condition that the government legislate for a review in two years – which it did.
Central South Australia Alliance Senator Stirling Griff also backed the reform, giving Mr Frydenberg the three cross votes he needed.
The final bill will have to be passed by the House of Representatives on Tuesday as it was amended by the Senate, but this is unlikely to raise significant issues as the government has a majority.
The permanent relaxation of disclosure laws has been welcomed by the Business Council of Australia and the Australian Institute of Company Directors.
BCA chairman Tim Reed said the changes reflected the reality that companies were operating in a much less certain world.
“A due diligence defense means that instead of directors looking at legal advice, they can keep the economy going without lowering their continuous disclosure obligation,” said Mr. Reed.
Angus Armor, chief executive of AICD, said the change provided greater certainty that companies and their directors would not be subject to â€œspeculative class actions challenging this disclosure in hindsight. “
“We hope that over time these changes will also help rebalance skyrocketing insurance premiums,” he said.
Labor had called the change “drastic” and said it was designed to thwart shareholder class actions and rebalance the interest of corporate executives against those who actually owned the companies.
Companies benefiting from acquired rights
One Nation also backtracked on its previous support for an amendment proposed by Independent Senator Rex Patrick.
If passed, Senator Patrick’s amendment would fill a loophole that allows about 1,100 private companies to keep their financial affairs secret by exempting them from filing requirements with the business regulator.
The change would have forced companies linked to some of Australia’s most high-profile business names, including Alex Waislitz, Lindsay Fox and Malcolm Turnbull, to disclose their financial records.
The amendment was supported by Labor, Greens and Senate Cross Benches, with the exception of One Nation, which it lacked a voice.
Queensland One Nation Senator Malcolm Roberts said his party decided not to support Senator Patrick because the government had promised to conduct a review of the loophole.
When asked for further details, Senator Roberts was unable to elaborate, while Mr Frydenberg was not drawn to the matter.
â€œThe government is working with all MPs on issues of interest to them to ensure that important reforms are passed,â€ he said.
The so-called “grandfathered large corporations”, which Senator Patrick opposes, have been exempted from certain reporting requirements under arrangements put in place by the Keating government in 1995.