WA directors face most legal issues: AICD

WESTERN Australia is ranked ahead of all states in terms of the number of laws imposing liability on directors, and it's a regime the Australian Institute of Company Directors fears could deter business investment in the state.

The AICD this week released its 'Boardroom Burden Report Card', which measures on a state-by-state basis the "business-friendliness" of legal regimes in terms of: the content of laws imposing liability on directors; the number of those laws in operation in each state and territory; and the procedural fairness with which they are administered.

The report card found most states fail the test when it comes to the liability burden imposed on company directors but, with 141 such laws WA, was rated the 'worst' followed by NSW, Queensland and South Australia, which also had more than 100 pieces of legislation of this type.
There are 663 state and territory laws that impose personal liability on individual directors for corporate misconduct. That is, directors are liable because they are a director, even where they may not have had any personal involvement in a breach.

The AICD report card shows that, overall, only the ACT and Victoria received better than a pass mark, while six states or territories failed.

Queensland scored the worst overall score, with a bottom-of-the-class mark of 18.23 per cent, while South Australia (26.70), WA (34.66) and New South Wales (37.23) also did poorly, all falling well short of a pass mark.

The ACT topped the class with 72.63 per cent, followed by Victoria (70.34), Tasmania (47.69) and the Northern Territory (46.67).

"This new report card highlights for directors the best and the worst states to do business in Australia from a director liability standpoint," AICD chief executive officer John Colvin said.
"Director liability issues affect business decision-making and can have an impact on where companies invest and create new jobs.

"If you were a director, where would you want to do business, locate investment projects and create jobs: a state that gets a mark of 70 per cent or one that gets 18 per cent?

"All state and territory governments should be looking to assess and reform their director liability laws, along the lines already agreed by the Council of Australian Governments.

"We need a first rate corporate governance legislative regime at the state and federal levels.
''The states' record in this area is very poor, with little thought to the long-term effects of not dealing with the issue."