Reform to the myriad state and territory directors’ liability laws is behind schedule, less than 15 months after the governments agreed to audit their statute books.

The states and territories agreed in November 2009 to an audit of some 708 provisions imposing personal liability on directors. But since then Victoria has questioned the need for reform, while other states have failed to produce meaningful timelines for implementation.

The Australian Institute of Company Directors (AICD) says “onerous and incongruent” liability laws are affecting investment and jobs. 

Only the ACT, Tasmania and Victoria have what the institute regards as “passable” laws, while Queensland is the worst state to do business in “from a liability perspective”.

“Any business looking to establish a headquarters or locate a new project in Australia, thereby expanding investment and jobs, should take this ranking into account,” AICD CEO John Colvin said.

“To this point, progress on this reform appears to have been non-existent, which is very disappointing for the director and business community.”

Queensland has 106 provisions regarding director liability, while WA has the most complex system with 139 separate laws.

State and territory governments agreed to audit laws governing directors’ liability at the Council of Australian Governments (COAG) in July 2008, but a lack of progress was criticised by the COAG Reform Council as recently as February last year.

In an update on reform progress, the council identified seven deregulation priorities that required “COAG’s greatest attention”, including directors’ liability.

While the council’s review did not include an agreement forged by COAG in December 2009 for a set of personal fault and corporate misconduct principles, a deadline to enact legislation expired at the end of last year.

While all states and territories bar Victoria have submitted plans to COAG to reform directors’ liability, only a few have given firm commitments for enacting new legislation.

But a lack of cohesion among state and territory governments appears to have had little effect on professional indemnity policies, which have fallen by 22% from 2007 to 2009, according to the Australian Prudential Regulatory Authority (APRA).

According to a report released by APRA’s National Claims and Policies Database in July last year, the national average written premium for professional indemnity risks fell by 10.2% in 2009 to $3078.