NT directors' liability reform

The Statute Law Amendments (Directors' Liability) Bill 2015 was passed on 26 August 2015 by the Legislative Assembly of the Northern Territory (NT) and will commence on a date yet to be fixed.

The legislation is the NT’s response to the Council of Australian Governments (COAG) directors’ liability reform stream under the COAG National Partnership Agreement to Deliver a Seamless National Economy.

The Australian Institute of Company Directors’ view

The COAG reform process was not designed to remove liability from directors who themselves personally commit or are involved in criminal conduct.  The purpose of the reforms was to reduce the number of legislative provisions making directors “automatically” liable for the criminal conduct of the company, given that the acts of the corporation can be carried out by a large range of individuals without the director’s knowledge or involvement.

The AICD has been a strong advocate for change and has actively engaged with states and territories to drive progress by supporting audits and recommending a model directors’ liability provision.

The territory reforms follow similar reforms in New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory. Western Australia is also in the process of reform, with the Directors’ Liability Reform Bill 2015 currently before the parliament in Western Australia. While these reforms improve the landscape for directors, regrettably we continue to see variations across jurisdictions and the Northern Territory reforms leave plenty of room for improvement.  

How does the bill affect directors?

The directors’ liability reforms under the Statute Law Amendment (Directors’ Liability) Act 2015 have relevance to a broad cross-section of directors in the Northern Territory. For example, the reforms impact small private companies and not-for-profit corporations as well as public companies.

The bill restores the presumption of innocence for directors in many pieces of legislation throughout the Northern Territory. However, the reforms retain two “Type 3” liability provisions, one in the Criminal Code and one in the Waste Management and Pollution Control Act. Type 3 provisions reverse the onus of proof and fail to uphold the fundamental legal principle that a person is innocent until proven guilty.

The AICD is of the view that the remaining Type 3 directors’ liability provisions should be removed. The AICD will continue to argue the case for these excessive provisions to be removed.  

While the AICD is of the view that further improvements should be made to the director liability provisions in the Northern Territory, the reforms are a step in the right direction and move the Territory closer to achieving a directors’ liability framework that is fair and appropriate.