Changes will tone down director liability laws
Monday, May 19, 2008/
Craig Emerson, the Federal Minister for Small Business and Deregulation, will lead a push to review state and federal laws that hold directors personally responsible for corporate problems.
The move, which was discussed at a meeting attended by Emerson, Federal Finance Minister Lindsay Tanner and state officials, is part of a broader reform agenda to harmonise federal and state laws across a range of areas.
Emerson believes that some directors’ liability regulations were making boards too cautious and deterred people from serving on them.
“We want to simplify the obligations placed on directors,” Emerson told The Australian. “Overly onerous laws can deter the risk-taking that is essential for small business. We want to pull them back where it seems sensible, so that company directors can spend more time making good business decisions and less time trying to understand highly complex legal obligations.”
Greg Hayes, senior partner at accounting and business advisory firm Hayes Knight, says directors and would-be directors will welcome any change that means they can spend less time pouring over their legal obligations and more time pouring over their company’s strategy. “I think every board goes through a level of corporate governance navel-gazing.
Anything that reduces the complexity and reduce the risk exposure is going to make people more comfortable.”
But Hayes says the best protection for any director from personal liability laws is still proper due diligence. “Obviously for any director it still comes down to the underlying business itself.”