Personal liability of directors and executives

The Corporations and Markets Advisory Committee has released a Discussion Paper on Personal liability for corporate fault.(pdf)

The paper reviews the circumstances in which directors and corporate managers may be held
criminally liable for corporate misconduct by reason of their formal position or function in a company and without the need to establish misconduct on their part. This form of liability is separate from that
of the company itself or of an officer who has actually participated in a corporate breach.

"The paper looks at a range of Commonwealth, State and Territory environmental, occupational health and safety, hazardous goods and fair trading statutes, as they provide significant examples of this kind of derivative liability. In pursuit of their various public interest goals, there is a trend in statutes of this kind to treat directors and other officers as personally liable, including for criminal offences, for breaches of the law by their company without the need to show personal culpability. Questions of balance arise between the objective of adding to the onus on those individuals to do what they can to ensure corporate compliance, and the reasonableness in the varying practical circumstances of corporate business activities of such a presumption of personal fault. An unduly
harsh approach may discourage people from becoming directors or undertaking other responsible corporate roles.

The paper invites comments on the need to go beyond corporate and accessorial liability to impose
liability on individuals by virtue of the position they hold in the company.

The Advisory Committee has called for submissions by 12 August 2005.

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