South Australia has become the latest state to implement legislation refining directors’ personal liability for offences committed by corporations. The Statutes Amendment (Directors’ Liability) Act 2013 (Act) will remove directors’ personal liability for offences committed by corporations from 19 current State Acts while also repealing and replacing existing directors’ liability provisions from another 24 Acts. The Act comes into operation on 17 June 2013 and adopts the Council of Australian Governments’ (COAG) reform program for directors’ liability which seeks to provide a more uniformed approach to personal liability for corporate offences.
New directors' liability provisions
These new provisions will impose individual criminal liability on directors or officers (as defined in the relevant State Act) for offences committed by the corporation. The Act reflects COAG’s recommended approach when dealing with these offences, summarised below:
- the corporation at first instance should be held liable before any liability is attributed to directors;
- directors should not automatically be liable for offences committed by the corporation, but rather a number of factors must first be considered to determine the ability of directors to influence the offending conduct of the corporation;
- directors should be liable where they have encouraged or assisted the commission of the offence or otherwise where they have been reckless or negligent in relation to the offence; and
- in some instances, directors will bear the burden of proving that reasonable steps were taken to prevent the corporation committing the offence, rather than the prosecution proving the offence beyond reasonable doubt (ie directors are deemed liable until they prove otherwise).
Types of offences
The COAG guidelines provided for three different types of offences for directors’ liability under the new legislative regime. South Australia has only implemented two types of offences summarised below:
- “Type 1 Offences” – offences where a director is innocent of any offence committed by the corporation unless the prosecution can prove beyond reasonable doubt that the director knew or ought to reasonably have known that there was a significant risk that the offence would be committed and the director was in a position to influence the conduct of the corporation and failed to exercise due diligence (take reasonable steps) to prevent the offence; and
- “Type 3 Offences” – offences where a director is guilty unless the director can prove, on the balance of probabilities, that he or she could not have prevented the corporation from committing the offence (ie. the onus of proof is reversed).
Actions for directors
The Act lists a broad range of South Australian Acts that have been amended with regard to directors’ personal liability. Directors should be aware of these changes and take particular note of Acts which may affect them. Directors should also be aware that the new provisions are specific only to the legislation listed in the new Act. Provisions in other legislation concerning personal liability not covered by this Act will continue to apply unchanged.
Directors should also note that these new provisions relate specifically to personal liability of directors for offences committed by a corporation and not to provisions dealing with offences personally committed by directors.