The liability-sanction relationship: A case study in the effectiveness of the corporate regulatory regime

This article analyses the effectiveness of the Corporations Act 2001 (Cth) as a regulatory tool for the sector. The Act regulates the conduct of directors by (i) establishing liability and (ii) imposing sanctions. The liability-sanction relationship determines the effectiveness of regulation. The relationship is further affected by the correlation between the sanctions imposed and the principles supporting those sanctions. This article uses Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 as a case study to evaluate the effectiveness of the Act in regulating the conduct of corporate directors. The article concludes that the sanctions imposed on the errant directors are not supported by the principle identified as underpinning them. Further, the article makes recommendations in relation to more appropriate sanctions in circumstances similar to those in the matter under discussion.