The Federal Government plans to repeal the section of the Insurance Contracts Act that applies liability to directors, employees or agents if they authorise a breach of the regulations.

“This section arguably imposes personal liability in circumstances where the person has not intentionally been involved in the offence,” the explanatory notes to the proposed Personal Liability for Corporate Fault Reform Bill.

“Consequently, this section will be repealed and a new section will be inserted which will impose criminal liability on a person where they are a director, employee or agent of an insurer that permits or authorises a relevant offence against the (Insurance Contracts) Act.”  

Parliamentary Secretary to the Treasurer David Bradbury says the proposed amendments to directors’ liability laws will form the first part of the Government’s implementation of the Council of Australian Governments' (COAG) directors’ liability reform project.

“Directors’ liability is one of the 27 regulatory reforms under COAG’s National Partnership Agreement to Deliver a Seamless National Economy,” he said.

“The reform aims to harmonise the approach to imposing personal criminal liability for corporate fault by requiring jurisdictions to audit their laws against COAG-agreed principles.”

The new bill proposes to make a corporation liable for breaches in the first instance. It says directors should not be liable for corporate fault and a “designated officer” approach to liability is not suitable for general application.

Personal criminal liability imposed on a director for the misconduct of a corporation should be confined to where there are compelling public policy reasons and the company is not sufficiently promoting compliance.

Directors will be liable for breaches if their obligations are clear and they had the capacity to influence the conduct of the corporation.

Submissions to the draft bill must be made to Treasury by March 30.