By Tarang Immidi, Law Graduate
On 7 December 2017, the government introduced the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 (the Bill) into the Senate. If enacted, the Bill will consolidate and broaden the existing private sector whistleblower protection under the Corporations Act 2001 (Cth) (Corporations Act). While the Bill proposes to establish greater protections for whistleblowers, it imposes obligations on companies, without providing for an exception for charities and not for profits.
The introduction of the Bill is the result of the Government’s announcement in the 2016-17 Budget to introduce strengthened whistleblower protections to come into effect by 1 July 2018. The final version of the Bill is the product of consultation on an exposure draft released for public comment in October 2017, which followed the tabling of the Report by the Parliamentary Joint Committee on Corporations and Financial Services. This had contained a number of recommendations, not all of which have been adopted by the Bill.
Nevertheless, the Bill is seen as the government’s response to concern regarding the treatment of a number of high profile whistleblowers in the financial sector in recent years, and imposes significant new regulatory obligations on most corporations. If the Bill becomes law in its current state, it will impose significant burdens on public companies and large proprietary companies, charities and not for profits that are public companies limited by guarantee (PCLGs). If enacted, the Bill is expected to come into effect on 1 July 2018.
The Bill proposes to:
- amend the Corporations Act to create a whistleblower protection regime for the corporate, financial and credit sectors; and
- amend the Taxation Administration Act 1953 (Cth) (Taxation Act) to create a whistleblower protection regime for those who expose breaches of tax laws or misconduct in relation to tax affairs.
1.1 Changes to the Corporations Act
The Corporations Act regime will implement four major changes to the current whistleblower provisions of the Corporations Act:
- Expanded scope of the protections: The scheme extends protections to whistleblowers (and their families) who make disclosures to the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulatory Authority, the Australian Federal Police, an auditor, or a director, secretary or senior manager of a company;
- Expanded protection available to whistleblowers: A compensation scheme is established in respect of harm or injury to a whistleblower. Additionally victimisation (being defined as actual or threatened detriment) is prohibited;
- Penalisation of disclosure of whistleblowers’ identity: The regime makes it an offence to disclose the name or any identifying information of a whistleblower, including to a court or a tribunal, unless necessary to do so. Courts will also be made to anonymise the identity of whistleblowers; and
- Requirement for a whistleblower policy: Under the reforms, all public companies (including PCLGs) and large proprietary companies must maintain and make available to all potential whistleblowers a whistleblower policy. It is made an offence to fail to do so.
1.2 Changes to the Taxation Act
Similar to the extended protections contained in the proposed amendments to the Corporations Act, the proposed changes to the Taxation Act contains express protections for whistleblowers who disclose tax misconduct or tax avoidance to an auditor, tax agent, director, secretary or senior manager of the company or the Australian Taxation Office. The changes to the Taxation Act do not introduce a requirement for a whistleblower policy.
2. What steps do charities and not for profits need to take?
The reforms will require all public companies and large proprietary companies, including charities and not for profits that are PCLGs, to create and circulate an internal whistleblower protection policy. This policy must detail:
- the statutory protections afforded to whistleblowers;
- the measures and procedures that the company will take to ensure the fair treatment of whistleblowers and employees who are the subject of disclosures; and
- any other matters prescribed by the regulations.
Companies that do not have an appropriate whistleblower policy in place by 1 January 2019 will face strict penalties of up to $12,600.
In addition to the requirement for a whistleblower policy, from 1 July 2018 all entities subject to the whistleblower protection scheme must ensure that whistleblowers who make eligible disclosures are protected from retaliation and victimisation.
Charities and not for profits that are public companies must begin to design processes and systems that deal with protected disclosures in a way that is compliant with these reforms. It will not be sufficient for companies that are subject to the reforms to draft a compliant policy and circulate it. The clear intent of the legislation is to ensure that companies have compliant processes in place to ensure the protection of whistleblowers, and can respond quickly and appropriately when a whistleblowing situation arises.
Charities and not for profits must begin to plan for the implementation of such procedures and processes along with a compliant policy, particularly given the significant expense that may have to be incurred in designing and implementing processes and systems that are compliant with the reforms.
3. A charitable exception?
The proposed scheme includes provision for ASIC to exempt classes of companies from the requirement to implement, maintain and circulate a whistleblower policy. Such an exception may be made subject to certain conditions and may be for only a limited period of time, or for an indefinite period.
It is not yet known what attitude ASIC might take in relation to establishing a blanket exception for charities and not for profits, or what kind of conditions it may choose to impose on any exceptions it makes. Charities and not for profits that are PCLGs must therefore take steps to be prepared for the introduction of the proposed protection regime.
While ASIC may well regulate to exempt charities and not for profits from requiring a whistleblower policy, PCLG charities and not for profits will still be bound by other protections required to be afforded to whistleblowers under the Corporations Act and the Taxation Act schemes. PCLG charities and not for profits will therefore serve themselves well to lend some thought to the development of procedures that will ensure compliance with the required protections, so as to avoid the strict pecuniary penalties that companies will face for breaching the proposed laws.
The nature of whistleblowing is such that it is inevitably unexpected. It will be exceedingly difficult to ensure compliance with the proposed reforms unless policies and procedures have been established in advance. Our advice to charities and not for profits in respect of the proposed reforms is simple: Be prepared!
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