Australia: listed company directors - disqualification and deterrence

Last week, in Australian Securities & Investments Commission v Soust (No 2) [2010] FCA 388, the Federal Court ordered that a director should be disqualified from managing corporations for a period of 10 years under Section 206C of the Corporations Act (2001). In doing so the trial judge stressed the importance of deterrence in determining the period of disqualification and made these observations concerning the trust reposed in the directors of listed companies (at para. [71]):

I am satisfied that a significant period of disqualification is required and justified in the present circumstances. In particular there is a significant role for personal deterrence to play for the reasons to which I have referred. It is also important that there be a general deterrence component of the period of disqualification as it is necessary to make it clear to directors and other persons in the commercial community that personal dishonesty in acting as a director of a corporation will not be condoned by the Court and will be visited with severe sanctions. Directors of corporations and, particularly, directors of listed public corporations must realise that they have a considerable amount of trust committed to them not only by the shareholders in their company but also by the company’s creditors, the commercial community and the public generally. They occupy a position of trust which, if misplaced, in appropriate cases should disqualify them from further participation in the management of such corporations for significant periods".