This is despite all State and Territories, along with the Commonwealth, signing up to the National Partnership Agreement to Deliver a Seamless National Economy, on 7 December 2010. The partnership agreement aimed to achieve a nationally consistent approach to the imposition of personal criminal liability for directors and other corporate officers for corporate fault.
At the time, the Council of Australian Governments (COAG), agreed to a set of six principles, along with detailed guidelines. The principles indicated that personal criminal liability for officers was generally considered inappropriate, except in certain circumstances.
According to these principles, 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 (such as the potential for significant public harm caused by the particular corporate offence)
- 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 considering:
- clarity of corporate obligations
- the director’s capacity to influence the conduct of the corporation, and
- the steps that a reasonable director might take to assure corporate compliance.
The principles further indicated that liability should occur where the director or officer encouraged or assisted in the offence or was negligent or reckless in relation to the corporation’s offending. The guidelines specified that reversing the onus of proof should only occur if supported by rigorous and transparent analysis.
Results of the review
In New South Wales, the Miscellaneous Acts Amendment (Directors' Liability) Act No. 2 2011 (NSW) and the Miscellaneous Acts Amendment (Directors' Liability) Act 2012 (NSW) have resulted in the number of provisions imposing personal liability on company directors in NSW legislation being reduced from more than 1,000 to about 150. NSW now only retains six statutes which require directors or officers to establish that they have not been involved in the contravention which may result in criminal conviction (reversing the onus of proof).
By contrast, the Directors’ Liability Reform Amendment Bill 2012 (Qld) is far less effective in achieving compliance with the COAG principles and guidelines. The Australian Institute of Company Directors, in response to the Queensland Bill, estimated that after the legislation was passed there would still be in excess of 100 instances where directors or officers would remain criminally liable for a corporation’s fault unless they established their lack of involvement in the contravention.
Clearly, further reform in Queensland is required to address the ongoing situation of company directors and officers being potentially criminal liable in circumstances where their own culpability need not be established by regulatory authorities.
We will keep you posted as changes to Queensland state legislation progress.
A widely published corporate and commercial lawyer, Paul is a Consultant to McCullough Robertson on Corporate Advisory issues.