A defence that may be available, in the context of a company issuing a prospectus that contains a misleading or deceptive statement or omission, to people otherwise liable on a disclosure document (section 729, Corporations Act 2001 (Cth) (CA 2001)) if they made all reasonable inquiries and, after doing so, believed on reasonable grounds that the statement was not misleading or deceptive, or that there was no omission from the prospectus in relation to that matter (section 731, CA 2001). This is known as the due diligence defence.

In practice, companies seek to ensure that they can rely on this defence by implementing a proper due diligence procedure when drafting the prospectus. This involves having a due diligence committee whose role it is to undertake thorough enquiries into the company.

For more information, see Practice notes: overview: