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Bill threatens directors

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directors to related body corporate organisations. This essentially eroded the firewalls between companies in groups.

The amendment has been rejected for the moment.

Australian Institute of Company Directors CEO Ian Dunlop said Australian company directors faced more onerous conditions than their colleagues in most other countries.

Mr Dunlop said that adding the uncommercial transactions provision to the Bill would make it very difficult for directors to function.

“Business is moving faster and the risks are arguably greater,” he said.

“This puts courts in the position of having to second guess directors. Our concern is the courts can apply the benefit of hindsight to commercial decisions.”

Mr Dunlop said the Labor amendment undermined the Australian

corporate structure.

“It hits at the very ability to fund organisations,” he said.

“What’s more, the parent company can become liable for the debts of any subsidiary.

“At a time when we’re promoting ourselves as a global financial centre, this could make us a laughing stock.”

Minter Ellison senior associate Leith Ayres said the general view was that the terms of the Bill were admirable but the current format was not the way to achieve the desired aims.

“The separation between companies and directors is becoming very small,” Mr Ayres said.

“In terms of risk, it is almost breaking companies down to the level of sole traders. This could be a real economic disincentive.”

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