The Australian Law Reform Commission has announced it has withdrawn two proposals in its November 2019 Discussion Paper to make senior managers liable for corporate misconduct in light of the subsequent proposed Financial Accountability Regime (FAR). Background.
Proposal 9 in the ALRC’s Discussion Paper was that the Corporations Act 2001 (Cth) (‘Corporations Act’) be amended to provide that when a corporation commits an offence, any officer in a position to influence the conduct of the corporation in relation to that offence is subject to a civil penalty, unless that officer took reasonable measures to prevent the conduct of the corporation. Proposal 10 proposed an offence of engaging intentionally, knowingly, or recklessly in conduct the subject of the civil penalty provision created in accordance with Proposal 9.
However in January 2020 the Department of Treasury (Cth) published a Proposals Paper for the introduction of a new wide-ranging FAR, designed to enhance responsibility and accountability of directors and senior executives in the financial industry, which has the potential to significantly alter the legal framework for individual liability in this sector.
The ALRC considers that the FAR provides a promising framework for enhanced individual liability, which if proven effective, could be extended to certain other sectors in the Australian economy.
In addition, individual liability may be strengthened through legislative amendment to the definition of ‘officer’ under the Corporations Act 2001 (Cth), though whether an amendment to the definition is required will turn in part on a case currently before the High Court. See ASIC v King.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
