TITLE: Australian Securities and Investments Commission Secures Continuous Disclosure Breach Finding Against Regional Express Holdings
BODY:
On December 19, 2024, the Supreme Court of New South Wales found that Regional Express Holdings Limited (Rex) breached its continuous disclosure obligations under Australian securities law. The court determined that Rex failed to meet its obligation to disclose material information to the market in a timely manner.
Rex issued a profit forecast on February 28, 2023, stating it was "optimistic the Group will have positive operating profits for the full FY23 barring any further external shocks." However, the court found that from April 14, 2023, Rex did not have reasonable grounds to expect the Rex Group would achieve those positive operating profits. Rex subsequently disclosed a significant profit downgrade on June 20, 2023, forecasting a $35 million Group operational loss. The company entered voluntary administration on July 30, 2024.
The Australian Securities and Investments Commission (ASIC) brought proceedings against Rex and its former executive chair, Lim Kim Hai. Mr Lim admitted to all alleged contraventions against him six weeks prior to this judgment and accepted he should face a pecuniary penalty and disqualification orders for breaching his director duties and involvement in Rex's continuous disclosure contravention. ASIC was unsuccessful in its case against three former non-executive directors—The Hon John Sharp AM, Siddharth Khotkar, and Lincoln Pan—for allegedly contravening their directors' duties, and in its alleged misleading conduct case against Rex. ASIC Chair Sarah Court emphasised that "continuous disclosure is a core obligation for listed entities and underpins Australia's corporate governance framework," noting it is critical that investors have access to accurate and timely information affecting investment decisions. The matter will return to court for a hearing on relief against Mr Lim.