At the Council of Australian Governments (COAG) meeting on 25
July 2012, all States agreed that the Personal Liability for
Corporate Fault – Guidelines for Applying the COAG
Principles should apply when drafting future legislation.
Further, the members agreed to amend current legislation
imposing personal liability upon directors to ensure that it was in
line with the agreed COAG principles and guidelines. These
developments are the result of an aim to achieve a nationally
consistent approach to the imposition of personal criminal
liability on directors and other corporate officers.
The Personal Liability for Corporate Fault Reform Bill 2012
(Cth) constitutes the overarching national legislative framework
for the approach. The reform covers the specific form of derivative
liability where a director or corporate officer is made criminally
liable for the acts of the corporation that they serve. The second
reading speech in the House of Representatives on 19 September 2012
confirmed the COAG's three step approach to reforming
derivative liability in Australia:
COAG endorses principles and establishes guidelines to guide
jurisdictions when imposing personal liability for corporate
Jurisdictions are to undertake an audit of their legislation as
against these principles and recommend amendments to bring them in
Jurisdictions are to commit to the implementation of the audit
outcomes by introducing legislation and amending existing laws by
the end of 2012. Future legislation is also to be drafted in
accordance with the principles.
The Principles establish that where a corporation contravenes a
statutory requirement the corporation should be held liable in the
first instance. There should be no automatic assertion of liability
against a director unless:
there are compelling public policy reasons for doing so
liability of the corporation alone will not promote
it is reasonable for the director to be held liable because of
role in the company
capacity to influence the corporation's conduct
failure to take reasonable steps to prevent the
Under the Principles, directors may be rendered personally
liable only where they have encouraged or assisted in the
commission of the offence or have been negligent or reckless in
relation to the corporation's offending.
Implications for Queensland
On September 7 2012, the Queensland Attorney-General Jarrod
Bleijie confirmed the significance of the reform in Queensland when
he said that, regardless of the director's knowledge:
There are currently 3,800 offences for which a director can be
personally liable under the existing [Queensland] laws. These
reforms will reduce the number of offences by half.
The Queensland adoption of the COAG Principles will ensure that
directors are personally liable only if they encourage or assist in
the commission of an offence or if they have been negligent
regarding its commission.
On Tuesday 25 September, Queensland Premier Campbell Newman
endorsed the introduction of the Directors' Liability Reform
Bill in Queensland by the end of the year, as a means of granting
directors a presumption of innocence. The endorsement is part of
the LNP's push to foster innovation and enterprise by cutting
red tape for businesses.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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