The Corporations Act (Cth) specifies a range of offences for directors and other office holders within a company, which may attract criminal and civil liability. Many of the corporate misconduct provisions were strengthened following a 2017 report by the ASIC Enforcement Review.
One of the key misconduct provisions of the Corporations Act is section 184, which imposes criminal liability on a director or other officer who:
- acts recklessly or with intentional dishonesty and fails to fulfil his or her duties to the corporation; or
- uses their position or information dishonestly (or recklessly) with the intention to gain an advantage for themselves or someone else or to cause a detriment to the corporation.
Other penalty provisions where directors may face personal liability relate to, among other things, insolvent trading, illegal phoenix activity, outstanding tax obligations, or debts incurred by companies acting as trustees.
Since 2018, new maximum penalties now apply to Corporations Act offences. In the most serious cases, individuals may be exposed to a maximum penalty of 10 years' imprisonment and/or the larger of 4,500 penalty units ($945,000) or three times the benefit gained or loss avoided as a result of the offence.
Other consequences of breaching director's duties may include:
- personal liability to compensate the company for losses caused by the breach;
- personal liability to compensate shareholders, creditors or other third parties for losses caused by the breach;
- removal from office; and
- banning orders preventing the office holder from managing other companies.