Has the Introduction of Civil Penalties Increased the Speed and Success Rate of Directors’ Duties Cases?
Company and Securities Law Journal, Vol. 34, No.7, pp. 549-554, 2016
6 Pages Posted: 4 Oct 2016
Date Written: October 2, 2016
Has the introduction of the civil penalty regime into Australian corporate law increased the speed and success rate of directors’ duties cases? This question has been the subject of much commentary but, surprisingly, no empirical research. A number of commentators argue that the civil penalty regime should have increased the speed and success rate of litigation brought by regulators. The Australian Securities and Investments Commission (ASIC) disagrees. In this research note, the authors present the results of the first empirical study aimed at answering this question. The civil penalty regime allows ASIC to bring civil proceedings for contraventions of the key directors’ duties provisions of the Corporations Act based on a standard of proof lower than the criminal standard and courts can impose a wider range of sanctions or remedies where a breach of duty is established. These sanctions are a pecuniary penalty, a compensation order or an order disqualifying the defendant from managing companies for a specified period of time. One of the policy considerations underpinning the introduction of the civil penalty regime is that it would reduce the time taken to complete enforcement action in the courts and also increase the success rate of litigation brought by the regulator. These consequences would result from the comparatively liberal civil rules of evidence and procedure. The authors researched all directors’ duties cases brought by either ASIC or the Commonwealth Director of Public Prosecutions for the 10 year period from 1 January 2005 to 31 December 2014. The research finds that, contrary to a widespread perception that civil proceedings are more successful for the regulator and quicker as a result of more lenient rules of evidence and procedure, there was only a relatively small difference between the success rates and duration of civil and criminal enforcement during the 10 year study period.
Keywords: Directors' Duties; Enforcement; Civil Penalties; Australian Securities and Investments Commission
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