For defence companies scaling quickly, a capital raise, a new director or a partnership approach is a security question as well as a commercial one.
Australia's defence supply chain is pulling in more small and mid-sized contractors and DISP has become an important entry point for many of them. Defence's own Office of Defence Industry Support reported DISP membership had passed 1,400 entities by mid-2025. Numbers were expected to keep climbing and the resulting surge in applications had created a processing backlog that Defence was working through [1].
Reaching DISP membership is often treated as a finish line. It is more accurate to think of it as an ongoing status. It gets reassessed whenever a company's ownership or board changes, not only when it first applies and updating it can take longer than most boards assume.
That matters because DISP sits directly alongside a company's growth plans. Legal advisers now write specifically for organisations looking to invest in or acquire existing DISP members, confirming that any change of ownership or control in a DISP-accredited business triggers a fresh assessment, not a formality [2].
For companies planning to grow, the practical response is to ask the security question alongside the commercial one, rather than dealing with DISP after the decision has been made. In Defence contracting, a growth decision is usually a security decision too. The boards that move fastest are the ones that have considered both from the outset and can prove it on paper.
Existing contracts carry their own consent requirements
Beyond DISP eligibility itself, current Defence contracts can require Defence's written consent before a change of control takes effect. Many contracts allow Defence to terminate if that consent is not obtained [2]. That turns a funding round, trade sale or internal restructure into a matter with a hard contractual deadline, not simply a security review happening in parallel.
A board that treats DISP and FOCI as the only checkpoint can still find itself in breach of a live contract if consent was not sought at the right stage of the deal.
This is why legal advisers now recommend building Defence engagement into the transaction timetable from the start, rather than treating it as a closing condition to tidy up later [2]. For a growing company, the conversation with Defence needs to start alongside the conversation with the investor or acquirer, not after heads of terms are signed.
Specialist insight
- Check DISP implications at the start of any ownership or board change, rather than treating reassessment as an administrative step after the decision has been made.
- Build Defence consent into the transaction timetable where an existing contract contains change-of-control provisions.
- Review the D&O programme for two specific issues: whether individual directors have protection separate from the company's cover and whether defence costs remain covered where a director is ultimately cleared.
How this actually plays out
These issues do not usually arise as separate decisions; they often stem from the same event. Take a funding round that brings in a new institutional investor: the share register changes, which creates a FOCI question under DISP. If the same round also shifts board control, it can separately trigger the change-of-control consent clause in an existing Defence contract, running on Defence's timeline rather than the deal's.
If Defence, an investor or a court ever looks back at how that raise was handled, the board minutes and correspondence showing FOCI and consent were actively considered can demonstrate that the implications were identified and dealt with at the time.
The commercial decision may be one event but the implications need to be considered across DISP, the contract and the board's governance record.
Where this becomes an insurance question
That third point is worth boards understanding as an insurance question not just a governance one. If a FOCI reassessment or a contract consent issue ever escalates into a genuine dispute, whether with Defence, an investor or a regulator, the board's D&O programme can become an important part of protecting the individuals who made the call. Two things are worth checking specifically.
First, whether the layer of cover that protects individual directors personally is properly separated from the cover that protects the company. Where a director is ultimately found personally liable, there can be limits on the company's ability to indemnify that individual, making the director's own D&O protection particularly important.
Second, whether the policy responds to defence costs while allegations are still being tested. A director who is ultimately cleared can still incur substantial legal costs simply defending the allegation.
A 2026 Federal Court case involving Star Entertainment illustrates why that distinction matters. Two senior executives were found liable and faced restrictions on the company's ability to indemnify certain defence costs, while the non-executive directors who successfully defended the claims had still incurred substantial defence costs of their own [4] [*see note].
Importantly, the Federal Court did not consider Star's D&O insurance arrangements, so the case does not establish what insurance would have responded. Rather it illustrates the underlying exposure that D&O insurance is designed to address.
For a growing Defence contractor this is worth checking now, not after a FOCI reassessment or a contract consent question turns into something more serious. A D&O programme bought or renewed before Defence contracts, security clearances and ownership scrutiny became part of the business may not have been built with this specific pressure in mind.
* Note: The dismissal against the non-executive directors is final. ASIC has confirmed it will not appeal [5]. The former CEO has since lodged an appeal against his own liability finding, so that part of the case remains unsettled [6].
“A capital raise, a new director or interest from a partner or acquirer is in this sector, always both a growth event and a security event.”
Building the habit
The practical point is to treat DISP standing and the governance record as part of ordinary commercial planning, rather than as separate compliance exercises.
For boards, that means asking three questions early: does the proposed change affect DISP or FOCI, does it require Defence consent under an existing contract and does the D&O programme respond if the decision is later challenged?
It also means keeping the paper trail: when the security question was raised, what was decided, and why. That record may ultimately be relevant to Defence, an insurer or a court.
Has your board built the habit of asking what your next growth decision means for DISP, your Defence contracts and your directors?
References
1. Office of Defence Industry Support (ODIS), "Defence Industry Security Program - Backlog Update," republished by Australian Industry & Defence Network (AIDN), 13 June 2025. https://aidn.org.au/defence-industry-security-program-backlog-update/
2. MinterEllison, "DISP membership: Insights for defence industry entrants," 17 June 2026. https://www.minterellison.com/articles/disp-membership-insights-for-defence-industry-entrants
3. Department of Defence, "Eligibility and suitability," Defence Industry Security Program, accessed August 2026. https://www.defence.gov.au/business-industry/industry-governance/industry-regulators/defence-industry-security-program/eligibility-suitability
4. Corrs Chambers Westgarth, "Directors and officers insurance: lessons arising from ASIC v Bekier," April 2026. https://www.corrs.com.au/insights/directors-and-officers-insurance-lessons-arising-from-asic-v-bekier
5. Australian Securities and Investments Commission, "26-040MR Federal Court finds two Star Entertainment senior executives breached duties, non-executive directors did not breach duties," 5 March 2026 (confirming ASIC will not appeal the dismissal against the non-executive directors). https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2026-releases/26-040mr-federal-court-finds-two-star-entertainment-senior-executives-breached-duties-non-executive-directors-did-not-breach-duties/
6. AGB, "Former Star legal chief appeals Federal Court findings over AML failures," July 2026 (confirming former CEO Bekier's appeal against his liability finding). https://agbrief.com/news/australia/21/07/2026/former-star-legal-chief-appeals-asic-ruling-over-money-laundering-failures/
