Directors and related bodies corporate that benefit from environmental offences committed by a corporation are subject to new liabilities and the NSW Environment Protection Authority (EPA) now has stronger enforcement powers. Due to the changes, environmental compliance and risk management practices should be reviewed and updated as required to minimise risks for corporations, their directors and related entities.
- On 4 March 2022, the Environment Legislation Amendment Act 2022 (NSW) (Act) amended five pieces of environmental legislation.
- The Act imposes financial and criminal liability on directors and related bodies corporate that receive monetary benefits from the commission of environmental offences by a corporation. It also gives the EPA greater powers to issue notices, impose restrictions on the use of land and require financial assurances.
- In light of their greater exposure to potential liability, directors and corporations must ensure that they maintain up-to-date environmental compliance and risk management practices that align with current environmental legislation in NSW.
Overview of the Act
We published an earlier blog post on the Environment Legislation Amendment Bill 2021 (NSW) shortly after it passed Parliament.
The Bill has now received royal assent. It became an Act on 4 March 2022 and came into force on the same day. The Act amended the following legislation:
- Protection of the Environment Operations Act 1997 (NSW) (POEO Act);
- Contaminated Land Management Act 1997 (NSW) (CLM Act);
- Pesticides Act 1999 (NSW) (Pesticides Act);
- Radiation Control Act 1990 (NSW) (RC Act); and
- Protection of the Environment Administration Act 1991 (NSW).
Increased exposure for directors and related corporations
Under new provisions in the Act, if a corporation is convicted of an environmental offence under the POEO Act, CLM Act, Pesticides Act or RC Act, then the court could order that any of the following persons, or another entity the court considers appropriate, pay to the EPA an amount representing the monetary benefit that the person obtained as a result of the offence:
- a related body corporate (as defined in the Corporations Act 2001 (Cth)) of the convicted corporation; and
- a person who is or was a director of the convicted corporation or its related body corporate at the time of the offence.
The Act also makes it an offence for any of the above persons to acquire financial or economic benefits from the commission of an environmental offence by a corporation.
These new provisions mean that it is more important than ever for corporations and directors to strictly monitor and comply with their environmental obligations.
If a corporation seeks to circumvent those obligations by implementing creative corporate structures or cutting corners, it will simply result in those who ultimately benefit from those efforts being pursued and divested of any benefits that they have derived.
Increased risk of regulatory action by the EPA
The Act has given the EPA expanded enforcement powers, including the ability to:
- issue clean-up and prevention notices immediately upon notification under s 60 of the CLM Act, without needing a declaration that the land is significantly contaminated;
- impose financial assurance on the basis of the financial capacity of a licensee or the addressee of a management order; and
- impose restrictions or covenants on land for the purpose of enforcing a condition, suspension or revocation of an environmental protection licence.
This means that businesses are now at a greater risk of having regulatory action taken against them by the EPA. The best way to mitigate this risk is to ensure compliance with all environmental obligations, so as to give the EPA as little reason as possible to take enforcement actions.
The Act has increased the exposure of directors and related corporations to liability for environmental offences and increased the risk of regulatory action by the EPA. Due to the changes, environmental compliance and risk management practices should be reviewed and updated as required to minimise risks for corporations, their directors and related entities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.