Data Explosion, Disclosure and Stepping Stones

Abstract

Disclosure laws are a key facet of corporate regulation. The advent of increased technology and innovation is having a significant effect on compliance with, and monitoring of, disclosure laws. When a company breaches disclosure laws a question arises as to whether the directors or officers of the company might be personally liable. This question has traditionally involved discussion of accessory liability or liability for being involved in a contravention (in addition to contravention of specific statutory provisions).

However, a relatively recent mode of liability, known as ‘stepping stones’, is frequently raised in Australian courts. Stepping stones liability has traditionally involved two elements. The first is a breach of the Corporations Act 2001 (Cth) by the company and the second is a breach of the statutory duty of care (or other duty) by the director or officer. Stepping stones liability is, however, arguably best seen as a straightforward application of the duty of care (or other duty). Stepping stones cases highlight the potential for directors in other common law jurisdictions to be liable for breach of the duty of care where the company contravenes laws relating to, eg, disclosure, misleading and deceptive conduct and data security. Compliance with such laws is in turn increasingly challenging due to the explosion of new corporate communication channels and the vastly increased amount of information available to, and about, companies.

Keywords: Directors’ Duties, Company Law, Companies, Corporate Governance, Duty of Care, Directors, Disclosure, Technology, AI, Corporations Act 2001 (Cth) S 180, Stepping Stones

JEL Classification: K00, K10, K20, K22, K29