Title: Crisis Spawns Reform – positive changes proposed, however tread carefully.

A mooted law reform in Queensland to impose personal liability for environmental damage could harm turnarounds.  The legislation, which is aimed at the Queensland Nickel debacle, not only seeks to impose liability on recalcitrant directors but it would also impose liability on newly appointed “cleanskin” directors and officers as well as professional advisors and financiers.  It has the potential to dissuade parties from saving a business for fear of personal liability.

The newly proposed Queensland legislation, the Environmental Protection (Chain of Responsibility) Bill 2016, has been introduced in response to the Queensland Nickel situation.  The draft legislation imposes personal liability on directors, owners, shareholders and others receiving a “financial benefit” to make good environmental obligations when a company fails.  If a company is likely to fall into voluntary administration there is a requirement to provide security bonds to cover potential liabilities.  As currently framed, it could well capture credit restructuring officers, directors and managers engaged to undertake a resource company turnaround trade. Investment banks and professionals involved in the turnaround could also be caught.  

Of course those who are to blame for environmental damage should be held to account, but those who are trying to save a business should not have to pay for the sins of others.  These reforms, as drafted, will discourage turnarounds.  Rather than trying to save a company, the prospect of liability could mean that the subject company is deserted and the government is left with the clean-up bill.

The Federal Government is pursuing a safe harbour to encourage enterprise and turnarounds.  The TMAA supports this initiative.  The mooted legislation is the antithesis of providing a safe harbour.

The TMAA encourages the drafters to ensure the bill excludes those acting in the safe harbour of rescuing a company from personal liability.  By all means impose environmental liability on those responsible for the events that led to environmental damage and the demise of a company.  But leave aside those working hard on the rescue.

http://statements.qld.gov.au/Statement/2016/3/15/government-moves-to-enforce-chain-of-responsibility-system-for-costly-environmental-cleanups