Following up on our most recent article on the criminal liabilities that can be imposed on directors (e.g. see HERE), we are pleased to provide the good news that legislation imposing personal criminal liability on directors is being reviewed.  The 23 July 2012 meeting of the Council of Australian Governments (COAG) agreed to principles and guidelines for the imposition of personal criminal liability on directors and other officers as a consequence of corporate offences. All future legislation is to comply with the principles, and the States and Territories are to review their existing director liability provisions.  If necessary, the existing provisions will be repealed or amended to bring them into line with the COAG principles.

 

The Commonwealth government has enacted the Personal Liability for Corporate Fault Reform Act 2012, and New South Wales has passed the Miscellaneous Acts Amendment (Directors’ Liability) Act 2012.  Similar bills have been introduced into the parliaments of Queensland, Tasmania and the ACT.

 

While there are some differences in the application of the COAG principles by the various states and territories, in general there will be three types of directors’ liability provisions:

 

·         Type 1 provisions require the prosecution to prove every element of the offence (a director will be presumed to have taken reasonable steps to prevent the commission of the offence unless the prosecution proves otherwise)

·         Type 2 provisions provide that a director is presumed guilty of an offence unless the director can produce at least enough evidence to suggest there is a reasonable possibility the director took reasonable steps to ensure the corporation did not engage in the behaviour constituting the offence (the prosecution will then bear the onus of proving that those reasonable steps were not taken or that there were other reasonable steps that should also have been taken)

·         Type 3 provisions, which are similar to Type 2 in that they presume the director is guilty; to avoid liability the director must prove on the balance of probabilities that they took reasonable steps to ensure the corporation did not engage in the conduct.

 

Under the directors’ liability Acts and Bills introduced so far, some Type 2 and Type 3 offences have been reduced to Type 1 offences, and some Type 3 offences to Type 2.

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