NSW Parliament Passes Bill reducing liability of directors for offences committed by Company

On 26 November 2012 the New South Wales Parliament passed the Miscellaneous Acts Amendment (Directors’ Liability) Bill 2012 providing for substantial reform regarding the liability of directors for offences committed by companies of which they are a director. Under the existing laws, directors were often automatically liable for offences committed by the Company. In most cases after the new law becomes operational,  a director will no longer be automatically liable for an offence committed by a company unless they acted as an accessory in an offence under the acts set out below. The bill amends the following acts

  • Animal Research Act 1985:
  • Building and Construction Industry Long Service Payments Act 1986
  • Children and Young Persons (Care and Protection) Act 1998
  • Classification (Publications, Films and Computer Games) Enforcement Act 1995
  • Contaminated Land Management Act 1997
  • Conveyancers Licensing Act 2003
  • Drug Misuse and Trafficking Act 1985
  • Drug Misuse and Trafficking Regulation 2011
  • Duties Act 1997
  • Electricity (Consumer Safety) Act 2004
  • Environmentally Hazardous Chemicals Act 1985
  • Explosives Act 2003
  • Food Act 2003
  • Forestry Act 1916
  • Funeral Funds Act 1979
  • Gaming Machines Act 2001
  • Health Insurance Levies Act 1982
  • Heritage Act 1977
  • Jury Act 1977
  • Landlord and Tenant (Amendment) Act 1948
  • Liquor Act 2007
  • Loan Fund Companies Act 1976
  • Long Service Leave Act 1955
  • Long Service Leave (Metalliferous Mining Industry) Act 1963
  • Mining Act 1992
  • Motor Dealers Act 1974
  • Motor Vehicle Repairs Act 1980
  • National Parks and Wildlife Act 1974
  • Native Vegetation Act 2003
  • Payroll Tax Act 2007
  • Pesticides Act 1999
  • Printing and Newspapers Act 1973
  • Property, Stock and Business Agents Act 2002
  • Protection of the Environment Operations Act 1997
  • Racing Administration Act 1998
  • Rural Workers Accommodation Act 1969
  • Security Industry Act 1997
  • Sydney Water Catchment Management Act 1998
  • Sydney Water Catchment Management Regulation 2008
  • Taxation Administration Act 1996
  • Threatened Species Conservation Act 1995
  • Unlawful Gambling Act 1998
  • Valuers Act 2003
  • Veterinary Practice Act 2003
  • Water Industry Competition Act 2006
  • Workplace Injury Management and Workers Compensation Act 1998

As explained in the Explanatory Memoranda, the amendments introduced three classes of executive liability:

  • Type 1 executive liability. This requires the prosecution to prove every element of the offence alleged to have been committed by the director or manager, including the element (the responsibility element) that he or she failed to take all reasonable steps to prevent or stop the commission of the offence by the corporation. The taking of reasonable steps was often previously referred to as using due diligence.
  • Type 2 executive liability. This provides that the responsibility element is to be presumed without the need for further proof, unless the director or manager adduces or points to evidence that suggests a reasonable possibility that there was no such failure to take reasonable steps.
  • Type 3 executive liability. This provides that the responsibility element is to be presumed without the need for further proof, and the director or manager bears the burden of proving, on the balance of probabilities, that there was no such failure to take reasonable steps.

However, the Explanatory Memoranda further explains that there are no provision in the amendments to impose Type 2 or Type 3 executive liability in the Acts and regulations that are amended by the Bill.

The object of the Bill was to amend certain Acts that impose executive liability, and to amend certain regulations made under those Acts, so as:

  1. to change the type of liability that is imposed for certain offences under those Acts and regulations, from executive liability to accessorial liability, and
  2. to change the type of executive liability that is imposed for certain offences under those Acts and regulations, from type 3 executive liability to type 1 executive liability, and
  3. to include, in or near each provision creating an offence committed by a corporation that gives rise to executive liability, a note drawing attention to that liability, and
  4. to include, where practicable, standard provisions for executive liability and accessorial liability, and
  5. to make other minor or consequential amendments.

The amendments are very welcome and harmonises the laws in New South Wales with those of other states.

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