The Use of Civil Sanctions for Breaches of Corporate Law

Abstract:     
Should greater use be made of civil sanctions for breaches of Corporate Law? The civil sanctions that are the subject of the Department of Treasury's review are contained in the civil penalty regime in Part 9.4B Corporations Act 2001 (Cth). This submission contains an evaluation of the Australian Securities and Investments Commission's ('ASIC') use of the civil penalty regime between 1993, when the regime was introduced, and 2006. Based on this evaluation it is recommended that greater use be made of the civil penalty regime for breaches of Corporate Law. While greater use should be made of the civil penalty regime it must be recognized that these enforcement provisions will not be suitable for all breaches of the Corporations Law.

The examination of ASIC's use of the civil penalty regime between 1993 and 2006 has produced the following findings:

* ASIC has achieved a high level of success with the civil penalty applications it has issued.
* While the civil penalty regime was used infrequently between 1993 and 1999 greater use has been made of the regime since 2000.
* Most civil penalty applications issued by ASIC have alleged contraventions of the directors' duties, insolvent trading and market misconduct provisions.
* Very few civil penalty applications issued by ASIC have alleged contraventions of the share capital provisions and the provisions governing the management of managed investment schemes.

The data analysed in this submission was obtained from two sources, the ASIC media releases and the civil penalty judgments issued between 1993 and 2006.

Keywords: corporate law, civil penalty regime

JEL Classifications: K22, G34, G38

Working Paper Series