Water Journal : Water Journal November 2011
feature article water NOVEMBER 2011 57 with respect to financial records and reporting, as well as to exercise the degree of care and diligence required of them. The Federal Court of Australia, once satisfied that the above provisions had been contravened, held that each director was to make a declaration of contravention in accordance with section 1317E of the Act, specifying: a. the Court that made the declaration; b. the civil penalty provision that was contravened; c. the person who contravened the provision; d. the conduct that constituted the contravention; and e. if the contravention is of a corporation/scheme civil penalty provision -- the corporation or registered scheme to which the conduct related. In addition to the declaration being made, the Court may order each director to pay the Commonwealth a pecuniary penalty of up to $200,000 or may disqualify each director from managing corporations for a period the Court considers appropriate, under sections 1317G and 206C of the Act respectively. Conclusions Corporations engaged in the business of producing water products should ensure that: • They have an appropriately qualifed board; • The board is suitably balanced to cover the various disciplines required of a water company, including: - Technical excellence (how the water process operates and the consequences of failure to meet water quality guidelines/standards); - Operational excellence; - Safety; - Accounting; - Environmental; and - Legal. A failure to address these points could mean directors could be found to have contravened their obligations. Directors, therefore, Table 1. Example of duties and obligations of directors and officers. Statute Jurisdiction Provisions State Owned Corporations Act 1989 NSW Schedule 10 -- Duties and liabilities of directors and other officers Part 1 3 Duty and liability of certain officers of statutory SOC [Stated Owned Corporation -- our addition] In this clause "officer" of a statutory SOC means: (a) a director of the SOC, or (b) the SOC's chief executive officer, or (c) another person who is concerned, or takes part, in the SOC's management. (2) An officer of a statutory SOC must act honestly in the exercise of powers, and discharge of functions, as an officer of the SOC. (3) In the exercise of powers and the discharge of functions, an officer of a statutory SOC must exercise the degree of care and diligence that a reasonable person in a like position in a statutory SOC would exercise in the statutory SOC's circumstances. Government Owned Corporations Act 1993 Queensland S123 Application of Corporations Act to officers of GOC [Government Owned Corporation -- our addition] (1) In determining for the purposes of the Corporations Act the degree of care and diligence that a reasonable person in a like position in a GOC would exercise in the circumstances of the GOC concerned, regard must be had to -- (a) the application of this Act to the GOC; and (b) relevant matters required or permitted to be done under this Act or another Act in relation to the GOC; including, for example -- (c) any relevant community service obligations of the GOC; and (d) any relevant directions, notifications or approvals given to the GOC by the GOC's shareholding Ministers. (2) This section has effect despite the Corporations Act. Corporations Act 2001 Commonwealth S180 Care and diligence -- civil obligation only Care and diligence -- directors and other officers A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: were a director or officer of a corporation in the corporation's circumstances; and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Water Journal December 2011
Water Journal September 2011