Personal Liability for Corporate Fault Reform Bill 2012 (second tranche)

• Date:28 Jun 2012
• Type:Policy Submission

This submission is in response to the Australian Government’s Exposure Draft of the Personal Liability for Corporate Fault Reform Bill 2012 (C’th)(second tranche)(the Draft Bill).

The Australian Institute of Company Directors has closely monitored the progress of the current COAG reform agenda set out in the National Partnership to Deliver a Seamless National Economy and in particular, the reform stream relating to director liability.  As part of this process we have been involved in discussions with the COAG BRCWG and State and Federal Government Ministers, regarding ways to deliver effective reform and appropriate legislative amendments in this area.

It is against this background that we responded to Treasury’s request for comments on the second tranche of the Government’s proposed reforms in this area. This submission follows our previous submission on the first tranche dated 30 March 2012.

Our comments on the Draft Bill included:

(a) Outside of the Corporations Act, we are of the view that the principles formulated by the Australian Institute of Company Directors should be used to determine whether provisions imposing personal criminal liability on directors are appropriate.

(b) In circumstances where provisions imposing personal criminal liability on directors are determined to be appropriate, the Australian Institute of Company Directors model provision should be inserted to ensure consistency across State and Federal legislation.

(c) The application of the Australian Institute of Company Directors principles and model provision avoids the inconsistent outcomes that have occurred as a result of the COAG process.

(d) While we support changing the criminal liability imposed on directors and officers for acts of the company to civil liability in certain circumstances, we are of the view that the change is undermined by simultaneously imposing a civil penalty that is higher than the existing penalty for the criminal offence.

(e) In order to ensure that the work undertaken in respect of these reforms is not undone, we are of the view that any new personal liability provision proposed in the future should be carefully scrutinized and analysed in accordance with the Company Directors principles. For this reason we do not support new personal liability provisions being introduced by way of regulations; and

(f) The Bill is also unlikely to assist the harmonisation of director liability provisions across Commonwealth, state and territory legislation because the liability provisions included in the Commonwealth legislation are different to those adopted by states which have passed legislation pursuant to these reforms (including NSW and South Australia).

Download our submission in response to the Exposure Draft, Personal Liability for Corporate Fault Reform Bill 2012 (PDF 9MB)