Senator Nick Sherry, Minister for Superannuation and Corporate Law, has welcomed the Council of Australian Governments (COAG) agreement to progress increased harmonisation of the laws on company director liability.
"We need corporate laws that create strong incentives for directors to act honestly, carefully and diligently. As part of this, we need a balance in our corporate laws between promoting accountability and ensuring suitable people are willing to serve as directors and take appropriate business risks."
"COAG has recognised that we need to get this balance right and has asked the Corporate Law Ministerial group to look at harmonisation," said Minister Sherry.
The Ministerial Council for Corporations (MINCO), chaired by Minister Sherry, will now examine the imposition of personal criminal liability for corporate fault and the contribution this makes to the goal of a seamless national economy, including nationally consistent regulation.
"Nationally consistent laws will contribute to quality decision-making by directors which will increase economic growth and benefit all Australians," Minister Sherry said.
Specifically COAG has referred this issue to MINCO with guidance in the form of the following principles:
- where companies contravene statutory requirements, liability should be imposed in the first instance on the company itself;
- personal criminal liability of a corporate officer for the misconduct of the corporation should generally be limited to situations where the officer encourages or assists the commission of the offence (accessorial liability); and
- in exceptional circumstances, where there is a public policy need to go beyond the ordinary principles of accessorial liability, a form of deemed liability could be imposed on a corporate officer only using a 'designated officer'approach (for minor offences) or a 'modified accessorial' approach (for more serious offences).
MINCO will report back to COAG with its recommendations for harmonisation and reform by mid-2009.
In addition, Treasury has completed a survey on directors in conjunction with the Australian Institute of Company Directors to assess the impact of corporate laws that impose personal liability on directors.
Nearly 100 directors of S&P/ASX-200 companies participated and full survey results can be found at www.treasury.gov.au. The survey results will be assessed as part of the COAG process.