AICD commissioned research: Australia’s “uniquely burdensome” director liability environment

To strengthen the evidence base on Australia’s comparatively strict director liability environment, the AICD commissioned Allens to research the frameworks for imposing criminal and civil liability on directors in Australia and comparative jurisdictions (the UK, New Zealand, Canada, Hong Kong and the USA).

The research considered contraventions of key corporations, prudential, competition, consumer, taxation, environmental and workplace laws, reviewing key similarities and differences between the jurisdictions.

In brief, the research concludes that while Australia has the same general frameworks for imposing criminal and civil liability on directors as other jurisdictions (namely, direct, accessorial and deemed liability), there are several important distinctions: 

• Australia regulates a relatively broad range of subject matter through the imposition of director liability;
• Australia imposes criminal liability (with harsh penalties) on directors relatively liberally, particularly in relation to dishonest or reckless contraventions of their corporate governance obligations;
• The emergent doctrine of stepping-stone liability has the potential to further expand the ambit of director conduct that may be subject to public civil enforcement; and
• Australia's civil penalties are harsh, even as compared with Australian and other jurisdiction’s criminal pecuniary penalties.

Additionally, Australia has a unique corporate criminal liability model, which can compel analysis of corporate culture and expose directors to corporate criminal proceedings even when their own conduct is not impugned.

Based on the analysis, Allens considers that Australia's director liability environment is unique - and in many regards, uniquely burdensome - as compared with other jurisdictions.