Peter A Clarke

The Personal Liability for Corporate Fault Bill passed the Houe of Representatives today. The bills web page is found here.

The Bill arose from the Council of Australian Governments’ National Partnership Agreement to Deliver a Seamless National Economy whose aim is to remove regulatory burdens on directors and corporate officers that cannot be justified on public policy grounds, and to minimise inconsistency between Australian jurisdictions in the application of personal liability for corporate fault in government laws.

The relevant COAG Principles are

• Where a corporation contravenes a statutory requirement, the corporation should be held liable in the first instance.
• Directors should not be liable for corporate fault as a matter of course or by blanket imposition of liability across an entire Act.
• A ‘designated officer’ approach to liability is not suitable for general application.
• The imposition of personal criminal liability on a director for the misconduct of a corporation should be confined to situations where:

–      there are compelling public policy reasons for doing so (for example, in terms of the potential for significant public harm that might be caused by the particular corporate offending);

–      liability of the corporation is not likely on its own to sufficiently promote compliance; and

–      it is reasonable in all the circumstances for the director to be liable having regard to factors including:

the obligation on the corporation, and in turn the director, is clear;

the director has the capacity to influence the conduct of the corporation in relation to the offending; and

there are steps that a reasonable director might take to ensure a corporation’s compliance with the legislative obligation.

• Where principle 4 is satisfied and directors’ liability is appropriate, directors could be liable where they:

–      have encouraged or assisted in the commission of the offence; or

–      have been negligent or reckless in relation to the corporation’s offending.

In addition, in some instances, it may be appropriate to put directors to proof that they have taken reasonable steps to prevent the corporation’s offending if they are not to be personally liable.

The Bill amends the Corporations Act to repeal the imposition of personal liability for corporate fault.  

The Bill also amends the Corporations Act to

•   replace the current criminal liability imposed on company secretaries and directors under that provision of the Corporations Act with a civil liability
•  impose a penalty for the breach of the civil liability

 The Bill adjusts the penalties associated with offences for which a company secretary is taken to be responsible to accord with general Commonwealth penalty principles.