In late 2013, laws came into effect in Queensland to reduce the personal liability of directors for corporate fault. The move is consistent with the commitment by the Council of Australian Governments (COAG) to achieve greater national harmony for directors’ liability provisions.
The Directors’ Liability Reform Amendment Act 2013 amended a raft of Queensland legislation and significantly reduced the number of offences under which ‘executive officers’ face personal liability (from some 3800 provisions to less than 300). ‘Executive officer’ is defined broadly to include not only directors but also 'a person who is concerned with, or takes part in, the corporation's management, whether or not the person is a director or the person's position is given the name of executive officer'.
The Act establishes two types of liability – ‘Type 1’ and ‘deemed liability’ provisions.
Under Type 1 provisions an executive officer commits an offence where the corporation commits an offence and the officer didn’t take all reasonable steps to ensure the corporation didn’t engage in the conduct.
In considering whether an executive officer has taken 'reasonable steps' the courts must now have regard to:
- whether the officer knew, or ought reasonably to have known, of the corporation’s conduct constituting the offence against the executive liability provision
- whether the officer was in a position to influence the corporation’s conduct in relation to the offence against the executive liability provision, and
- any other relevant matter.
- Under the deemed liability provisions, where a corporation commits an offence against a provision of the Act, each executive officer is also taken to have committed an offence if:
- the officer authorised or permitted the corporation’s conduct constituting the offence, or
- the officer was, directly or indirectly, knowingly concerned in the corporation’s conduct.
These provisions significantly reduce the potential exposure of directors by confining exposure to situations where the directors or officers have some involvement in the commission of the offence. Previously, directors could be liable for the corporation’s commission of an offence without any such involvement.
The new laws also remove almost all director liability provisions which reversed the onus of proof.
The Queensland Legislation Handbook now makes it clear that proposed legislation should not make directors or executive officers of a corporation personally liable for offences committed by the corporation unless there is clear
justification for so doing. Further, if a provision is included, it must not reverse the onus of proof.
Queensland joins a number of other Australian jurisdictions which have reformed director liability provisions.