How did we get here?

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Listed on the Australian Securities Exchange (ASX) since December 2016, GetSwift provided software solutions for delivery and logistics businesses.  In early 2018, the company announced various large-scale contracts with high-profile companies, which led to a significant increase in its share price.

GetSwift was put under the microscope in February 2018, when the Australian Securities and Investments Commission (ASIC) launched an investigation into its disclosure practices after serious questions were raised. GetSwift requested a trading halt while it undertook an internal review.

Corporate misconduct under the microscope

In December 2020, ASIC released its findings from the investigation into GetSwift's disclosure practices. ASIC found the company had breached its continuous disclosure obligations on several occasions, by failing to disclose material information to the market in a timely manner. The breaches related to the company's announcements about its contracts with major companies, which ASIC found were misleading and contained inaccurate information. ASIC also found that GetSwift failed to keep the market informed about delays in the rollout of its software platform, which had a material impact on the company's share price.

ASIC originally submitted what was considered a very high penalty against the pair of directors - $1 million each and 12-year disqualifications, however, Justice Lee doubled the penalty to $2 million and disqualified former director, CEO, and executive chairman, Bane Hunter for 15 years, while former director Joel Macdonald was ordered to pay a penalty of $1 million and was disqualified for 12 years. These are two of the highest penalties directors have received for corporate misconduct.

Getting the basics right

The GetSwift case highlights the need for companies to take their disclosure obligations seriously and to ensure that they have adequate processes in place to comply with these requirements. Companies that breach their obligations risk significant penalties and reputational damage, as well as potential legal action from investors.

Directors of listed companies also have a range of legal and ethical responsibilities. These duties include acting in the best interests of the company and its shareholders, exercising care and diligence, avoiding conflicts of interest, and ensuring compliance with legal and regulatory requirements.

For more information, the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations provide further guidance for directors on their responsibilities, including the need to ensure that the company has adequate internal controls and risk management processes in place, and to provide accurate and timely information to shareholders.

Managing your financial risk exposures

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On a related note, ASIC has warned it will seek record penalties for breaches of market disclosure amid new findings that listed companies may be acting illegally by failing to disclose material cyber-attacks. Investors rely on accurate information to make informed decisions about their investments, and companies that breach their disclosure obligations risk losing the trust and confidence of investors.

As highlighted in the Getswift case, directors and officers of ASX-listed companies can be held personally liable for breaches of the continuous disclosure obligations. This means that they may be required to pay damages, legal fees, and other costs associated with legal action. Directors & Officers’ insurance (D&O) can provide protection against these risks by covering the costs of legal defence and damages against the director or officer.

D&O insurance is an important tool for protecting company directors and officers against the financial risks associated with legal actions arising from breaches of the continuous disclosure obligations on the ASX. To find out more, feel free to reach out at any time.

‍Ben Robinson

Placement Manager - Professional & Executive Risks

‍benjamin.robinson@honan.com.au

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