The Parliamentary Secretary to the Treasurer, the Hon Chris Pearce MP, announced today that the Government would restore certainty for those acting as directors of corporate trustees, following the decision in Hanel v O’Neill [2003] SASC 409.
The decision, handed down by the Full Court of the South Australian Supreme Court in December 2003, extended the circumstances in which a director of a corporate trustee company would be held personally liable under subsection 197(1) of the Corporations Act. As a result of the decision, directors of corporate trustees were regarded as effectively guaranteeing trust liabilities, in the event that there were insufficient assets to meet these.
“As a result of Hanel, directors of corporate trustees were unfairly exposed to increased potential personal liability”, Mr Pearce said.
“The proposed amendment will re-establish the traditional interpretation of the law, and ensure that directors of corporate trustees are treated fairly in comparison to other company directors.”
Mr Pearce said that the decision to amend the Corporations Act followed concerns raised by stakeholders, including the Law Council of Australia and the Institute of Chartered Accountants in Australia about the implications of the Court’s interpretation of subsection 197(1).
Mr Pearce announced that the reform would form part of the Corporations Amendment Bill (No 1) 2005, which would be introduced in the current Budget Sittings of Parliament.
Mr Pearce said that he expected that the proposed amendment would rebuild business confidence for both directors of corporate trustees, and the wider community.
The Corporations Amendment Bill (No 1) 2005 also contains a technical amendment to clarify the operation of a transitional provision in the Corporations Act. The amendment will ensure that the auditor independence provisions which applied prior to the enactment of the CLERP 9 legislation continue to apply to financial years commencing prior to 1 July 2004.
Media contact:
Gillian Harvey (03) 9887 3890
2 June 2005
CANBERRA