Growing complexity an increasing legal minefield for directors

  • Date:03 May 2012
  • Type:Media Release

The role of a company director is becoming increasingly complex as new laws are introduced, class actions are on the rise and the activity of regulators increases.  

To assist both new and experienced directors with these growing challenges, the Australian Institute of Company Directors has released an updated version of Duties and Responsibilities of Directors and Officers by Professor Robert Baxt AO FAICDLife* – a landmark publication, which has now reached its milestone 20th edition.

At the book’s launch, Chief Executive Officer and Managing Director of the Australian Institute of Company Directors, John Colvin, said it provides directors and officers with critical guidance at a time when director’s actions are under increasing scrutiny and reform is the subject of debate.

“In our most recent Director Sentiment Index survey, most directors said that current governance regulations under the Corporations Act are onerous,” said Colvin.

“Continuous piecemeal changes to legislation such as the Corporations Act can lead to errors and the need for ongoing amendments. It is difficult for directors, corporations and others to stay up-to-date.”

“This book, which has been authored by one of Australia’s most respected corporate lawyers, Professor Baxt, should take prime position on every director’s bookshelf,” said Mr Colvin.

Professor Baxt, who has authored the book since its 5th edition in 1987, said that recent court cases such as Centro, James Hardie and Fortescue have made it even more difficult for directors to navigate their role without fear of being held personally liable.

“There seems to be a never-ending raft of legislation imposing personal liability on directors. With approximately 700 State and Territory laws making directors liable, it is little wonder that organisations across the country are being hampered by less than optimal decision making,” said Professor Baxt.

The 20th edition addresses these legal minefields but Professor Baxt says governments need to seriously focus on real reform in this area.

“Continuing to draft strict liability provisions into legislation or provisions which reverse the onus of proof against directors is fundamentally obnoxious.”

“On top of this, the growth of class actions and results in cases where shareholders/members have been able to sue directors and companies is another cause for concern,” he said.

 “The rise in class actions has been assisted by recent court decisions and the lack of appropriate regulation for professional litigation funders. This results in increased costs to the public by way of higher consumer prices, a reduction in shareholder value and decreased tax revenue as profits decline.” said Professor Baxt.

“Recent comments by ASIC that shareholder class actions are an appropriate market driven response are, in my view, to be tempered by the need to ensure that we have proper regulation in this area. Without that such actions can become a very unruly horse”

The book, first published in 1982, is a foundation resource for legal students, academics and practicing directors. It is also a critical element of Company Directors’ portfolio of resources designed to ensure directors’ knowledge is current.

Media contact

Matt Pritchard, Communications Advisor, 02 8248 6624

About the author

Professor Robert Baxt AO FAICDLife has been in the public eye for a large part of his career as a lawyer and legal academic in trade practices, corporate law and taxation law. Professor Baxt is currently an Emeritus Partner of Freehills and a former chairman of the Trade Practices Commission.

Professor Baxt is chairman of the Law Committee of the Australian Institute of Company Directors, and a member of the Executive of the Business Law Section of the Law Council of Australia. He was the founder of the Banking Law Association and is the general editor of both the Company and Securities Law Journal and the Australian Business Law Review. He is an editorial adviser to CCH Australia and the author of The Australian Institute of Company Directors' Directors Counsel. Professor Baxt is also the general editor of The Baxt Report.

Professor Baxt was honoured in the Queen's Birthday Honours Awards in 2003 by being awarded an Order of Australia for services to the law and has been awarded the Centenary Medal. He is also a professorial Fellow of the University of Melbourne.

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