Corporate manslaughter Directors may be criminally liable


    The AICD through its committees and the Research amp; Policy division has made a number of submissions to government and statutory authorities. Here is a summary of the most recent subjects.

    If one or a number of your workers die as a result of industrial accidents or if one of your employees commits a crime you had better watch out because governments in the UK and Australia are now moving to try and hold boards and directors legally liable. Under legislation proposed in the UK, companies responsible for fatal accidents will face the threat of unlimited fines and court orders to remedy the cause of the accident and directors can be disqualified. A new offence called corporate killing will be introduced to make it easier to prosecute companies for corporate manslaughter and this is intended to replace the offence of involuntary manslaughter where this relates to companies. In Australia, the Victorian Government released a draft of the Crimes Industrial Manslaughter Bill in October and set November 3 as the deadline for submissions. Although a ludicriously short deadline for a Bill of such importance, AICD succeeded in lodging a detailed critical submission in time. While much of the proposed Victorian legislation is pertinent in terms of Occupational Health and Safety, it is the intention to change the law on involuntary manslaughter which provides the major concern.

    The Bill seeks to make companies and senior company directors and officers prima facie criminally liable for criminally negligent acts or omissions of a non-senior officer or for an aggregation to criminal negligence of various independent non-criminally negligent acts of any number of non-senior officers. A major problem for directors and senior officers with the Bill is that criminal liability imposed by it would be outside the cover of any directors' and officers' liability insurance. The proposed legislation strikes at the heart of the foundation of Australian business and the concept of limited liability. Queensland is planning similar legislation.

    Auditor independence There has been some concern expressed by various parties that the independence of auditors could be compromised if the firm they are directly employed with also performs other financial and/or accounting services for the firm they are auditing. In the US, the Securities and Exchange Commission, is having a hard look at this issue and there is resistance from the Big Five accounting firms to any move involving government regulation. AICD has taken the position that the management of audit and non-audit services is a matter for individual companies to decide and that the law should not place restrictions on an auditor performing non-audit services for a client provided that:

    • there is a mandatory requirement to adhere to the independence requirements of ethical rulings and auditing standards;

    • the disclosure rules relating to non-audit services should be expanded;

    • a company's audit committee should review non-audit services provided by the auditor annually.

    Impairment of assets The Australian Accounting Standards Board published Exposure Draft 99 relating to harmonising international accounting standards concerning assets and the issue of book value versus market value of assets. The book value versus market value of assets is of vital concern, for example, to government authorities with infrastructure assets. As well, certain classes of assets can become impaired (other than depreciation) and the accounting rules on these situations need to be clarified. AICD supports the purpose of an impairment test, which will ensure that the carrying amounts of assets are recoverable from the future economic benefit that they are expected to generate, and that any losses of future economic benefits are properly recognised.

    Corporate groups Concern has been expressed by the public and the Federal Government that there have been occasions where a subsidiary of another body corporate goes into liquidation or receivership and no one is readily accountable. The Companies and Security Advisory Committee (CASAC) investigated this and other issues related to corporate groups. AICD responded to this report. AICD is concerned that the proposed changes do not adequately address the issue of an appropriate test for determining what is a holding company or subsidiary and what constitutes control. As well, the CASAC report proposes to expand the liabilities for insolvent trading in a manner that, in the AICD's view, is inconsistent with commercial practice.

    Share-based payments AICD was invited to comment on the G4+1 discussion paper Accounting for share based payments to employees. The paper asked: "Do you agree with the proposal that transactions whereby an entity purchases goods and services by issuing shares or share options should be recognised in the financial statements, thus resulting in a charge to the income statement when those goods and services are consumed?" It is the view of the AICD that the answer is no, citing the reason that there is a fundamental difference between the issuing of shares to buy an asset and the allocation of shares or options to employees.

    R&D submission Following the release of the Miles and Batterham reports into innovation and R&D (Company Director, November), the AICD has made a submission to the Federal Government. This plan advocates a Federal government's allocation of $1 billion for innovation, not all required in year one, together with $300 million per annum on a continuing basis. As far as tax incentives go, AICD advocates setting up a high level working group to look at the best way to spend the current allocation of revenue foregone with the 125 percent R&D concession and, in particular, to determine the optimal method to offer significant incentives to overseas companies to locate R & D facilities in Australia.

    Intangibles AICD has conducted a survey of members to gauge their view on the appropriate accounting treatement of intangibles. This will form the basis of an AICD submission. We would like to thank everyone for providing their views. The winner of the Penfolds Grange Hermitage is Derrick John Docherty, FAICD. Additional details concerning AICD submissions are available on


    The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.

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