Sherry welcomes COAG investigation of director liability

The Minister for Superannuation and Corporate Law, Nick Sherry, has backed the decision of the Council of Australian Governments (COAG) to investigate imposing personal criminal liability on company directors.

The Ministerial Council for Corporations (MINCO), which will be chaired by Sherry, will examine imposing personal criminal liability for corporate fault and work towards introducing national regulation.

COAG has suggested that if companies contravene statutory requirements, liability should be placed on the company first, while personal liability of a corporate officer should be limited to situations in which the person involved encourages or assists the offence.

When 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 using a designated officer approach for minor offences and a modified accessorial approach for a more serious offence.

“We need corporate laws that create strong incentives for directors to act honestly, carefully and diligently. As part of this, we need a strong balance in our corporate laws between promoting accountability and ensuring suitable people are willing to serve as directors and take appropriate business risks,” Sherry said.

MINCO will report back to Sherry in 2009.

Treasury has also completed a survey in conjunction with the Australian Institute of Company Directors to assess the possible impact of corporate laws that impose personal liability on directors. Nearly 100 directors took part in the survey.