On 19 September 2012, the Federal Government introduced the Personal Liability for Corporate Reform Bill 2012 into the Parliament. On 20 September the Senate referred the Bill to the Parliamentary Joint Committee on Corporations and Financial Services, with a reporting date of 29 October 2012.
The Bill is said by the Government to be the response to the Council of Australian Governments (COAG) initiative on directors' liability reform and is said to ensure that a director will only be made criminally liable for the fault of a corporation where it is fair and reasonable in all circumstances to do so. As noted below, it is doubtful that objective will be achieved, at least in relation to those pieces of legislation considered in this notice.
The Bill proposes to make amendments to a number of pieces of legislation, including the Corporations Act and the Foreign Acquisitions and Takeovers Act, being the most relevant to Johnson Winter & Slattery and its clients.
The amendments to the Corporations Act do little more than make section 188 - dealing with company secretarial matters - a civil penalty provision, apart from purely drafting changes and adding various non-operative notes to other provisions in the Act. Section 188 deals with a number of essentially administrative matters for which the company secretary (if appointed) is liable where the company contravenes one of the list of provisions, or in case of a proprietary company that does not have a company secretary, for which each director is responsible.
In relation to the Foreign Acquisitions and Takeovers Act, the only change is to limit derivative liability of officers to those who "authorised or permitted the commission of the offence". The current position is that, at least according to the Explanatory Memorandum, only an officer of a corporation who is "in default" will be guilty of the offence and this will include an officer who "authorises or permits" the commission of the offence. Accordingly, the proposed change to the Foreign Acquisitions and Takeovers Act is hardly substantive.
The Bill is a somewhat disappointing response to the COAG initiative and does not make any change of substance in relation to personal liability of directors, at least under the Corporations Act and the Foreign Acquisitions and Takeovers Act.