Outside of North America, Australian companies are more likely to face a class action than anywhere else in the world.  And aside from the legal issues, class actions have the potential to significantly impact a company’s reputation and share price.

Data shows that class actions are a key issue for Australian boards, directors and senior management – and their insurers:

  • Respondents to our recently-published 2016 Global Litigation Survey ranked class actions among their top five most concerning disputes.
  • Aon’s 2015 Global Risk Management Survey found that damage to company brand and reputation has emerged as the top-rated risk for business leaders for the first time since 2007.

So what can businesses do to manage class action risk?

  1. Senior management and company directors should ensure that continuous disclosure obligations remain front of mind.
  2. Boards need to be vigilant in ensuring compliance with ASX Listing Rules and public disclosure obligations of profit re-forecasts and downgrades are provided in a timely manner.  Plaintiff law firms and litigation funders are on the lookout for opportunities to commence class action following a profit downgrade.
  3. Ensure disclosure documents are accurate and appropriate disclaimers are made.
  4. To best protect the company’s balance sheet, ensure that insurance policy limits for D&O, Side C Entity Cover and Legal Liability are adequate to cover costs and the likely value of any claim.  Obtain advice from your broker and insurer on appropriate limits of indemnity, based on recent verdicts and defence costs.
  5. In the event of a threatened or actual class action, appoint experienced class action defence counsel who understand the importance of a case strategy and class action court process, and notify your insurer.

Class actions have become big business in Australia.  From a global perspective, Australia is seen as a lucrative growth market for these actions.  How would your business cope if a class action was launched against it?

Click here for a copy of our class actions brochure, which details our approach to managing actual and potential class actions.