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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Author:
Australia | Publication | aprile 2020
Australian regulators have acknowledged the tremendous challenges and disruptions facing Australian businesses as a result of COVID-19.
A number of prominent agencies have adjusted the approach they are taking in these extraordinary times as both regulators, and those they regulate, work out an effective response to what has become not just a health crisis, but also a much broader economic and social crisis.
'A business ecosystem not only includes staff, customers and suppliers – it includes regulators too.'
This might appear to herald an interim period of more relaxed supervision of regulated businesses, but it is a critical mistake to think that this means performance on compliance can be ignored altogether.
The ACCC and ASIC have specifically emphasised that they will continue to prioritise during the COVID-19 crisis the investigation and enforcement of matters which indicate significant consumer harm. In revised guidance issued on 14 April, ASIC also cautioned that it would be ‘especially vigilant’ in ensuring investor and other stakeholder protection and preventing blatant corporate abuses. Entities that seek to exploit COVID-19 for their commercial advantage will therefore come under the microscope of the regulators with immediate impact.
And while the Australian Government has introduced a temporary six-month moratorium on insolvent trading liability for directors with the passage of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) on 24 March 2020, that is not a blanket licence for reckless trade where there is no realistic prospect of a company being able to trade out of its current difficulties once the interim demand and supply chain disruptions subside. Directors who allow debts to be incurred in a manner which exploits employees and other creditors still face investigation for a possible breach of their core obligations to the company under the Corporations Act.
Moreover, once the worst of the crisis subsides, companies will still need to grapple with important structural measures such as culture and governance reviews and more targeted, effective investor and market disclosure – the current crisis offers an interim respite, not a permanent escape.
As things currently stand, ensuring business continuity in the exceptional COVID-19 environment requires, in part, a reassessment of key operational, compliance and conduct risks. These risks will change in nature as the pandemic generates new challenges and obstacles on a daily basis.
This means, for example, that:
'Major COVID-19 risks include regulatory compliance and how internal controls hold up in this time of extreme disruption.'
This will also present an opportunity for organisations to think about their regulatory strategy.
As regulators wrestle with their own responses to the COVID-19 crisis, their focus on, and expectations of, businesses could well change.
One example is the demonstration by firms of ‘fairness’ at a time of major business dislocation and customer uncertainty. Aside from being a Hayne ‘simple idea’, it is now a key principle in codes of conduct (such as the revised Banking Code of Practice 2020, to which the banking sector signed up, and also the impending commercial tenancy codes to be adopted in all states and territories as a COVID-19 response measure to facilitate eviction moratoria and rental reductions, deferrals and waivers for struggling tenants), as well as under the core obligations for financial service providers in Section 912A of the Corporations Act. Non-compliance with that principle as the COVID-19 crisis continues to unfold presents a ripe opportunity for enhanced regulator scrutiny and the potential for an adverse impact on brand reputation.
It therefore pays for entities to think about how regulators may change their approach as the ramifications of COVID-19 play out and how this impacts on entities’ own regulatory strategy and the outcomes they seek to achieve from their regulatory relationships. It may even be something for entities to consider addressing directly with the relevant regulators.
So, the takeaway for businesses in all sectors is that, as they continue to adjust, survive and best position themselves to continue some form of ‘normal’ business once the worst of COVID-19 subsides, they must not treat certain regulatory relaxations and dispensations as a licence to ignore a rapidly evolving liability risk framework and constructive engagement with regulators.
While the risks might have changed, and will undoubtedly continue to change in a climate of inherent uncertainty where ‘day by day’ is the new norm, the risks are no less significant in their scope, complexity and implications.
Businesses must be conscious of this and be prepared to adjust with flexibility and precision to survive the impact of COVID-19.
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