The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has announced that the Ministerial Council for Corporations (MINCO) has agreed on a set of principles by which all jurisdictions will audit their legislative provisions that deal with personal liability on company directors as the next step towards achieving consistency across Australia on the laws that impose personal liability on directors.

Upon completion of the audit, the next step for all jurisdictions will be to move to amend any laws that do not adhere to the agreed principles.

The principles are:

• 1.Where a corporation contravenes a statutory requirement, the corporation should be held liable in the first instance.
• 2. Directors should not be liable for corporate fault as a matter of course or by blanket imposition of liability across an entire Act.
• 3. A “designated officer” approach to liability is not suitable for general application.
• 4.The imposition of personal criminal liability on a director for the misconduct of a corporation should be confined to situations where:
  

  a.there are compelling public policy reasons for doing so (e.g. in terms of the potential for significant public harm that might be caused by the particular corporate offending);

  b.liability of the corporation is not likely on its own to sufficiently promote compliance; and

  c.it is reasonable in all the circumstances for the director to be liable having regard to factors including:
  i.the obligation on the corporation, and in turn the director, is clear;
  ii.the director has the capacity to influence the conduct of the corporation in relation to the offending; and
  iii.there are steps that a reasonable director might take to ensure a corporation’s compliance with the legislative obligation.

• 5. Where principle 4 is satisfied and directors’ liability is appropriate, directors could be liable where they:

a. have encouraged or assisted in the commission of the offence; or
b.have been negligent or reckless in relation to the corporation’s offending.

• 6.In addition, in some instances, it may be appropriate to put directors to proof that they have taken reasonable steps to prevent the corporation’s offending if they are not to be personally liable.