Civil Penalties under Corporations Act

Key Takeaways

• Since the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019, the maximum civil penalty for an individual director is now 5,000 penalty units (approximately $1.65 million) or three times the benefit obtained, up from the previous $200,000 cap.
• In ASIC v Healey [2011] FCA 717 (Centro), the Federal Court held that directors have an 'irreducible, non-delegable core duty' to read and understand financial statements before approving them, and cannot delegate this responsibility to management or auditors.
• The business judgment rule under s 180(2) of the Corporations Act 2001 (Cth) does not apply to compliance decisions such as continuous disclosure, as confirmed in ASIC v Vocation [2019] FCA 807.
• ASIC can pursue both civil penalties and criminal prosecution for the same conduct, as demonstrated in ASIC v Adler, where civil penalties of $450,000 and a 20-year ban were followed by criminal proceedings resulting in 4.5 years imprisonment.
• The ASIC v Star Entertainment proceedings represent the first recent case where ASIC has pursued an entire board of directors for breach of s 180(1), including for failures in non-financial risk management such as AML/CTF compliance.

1. 1.The Penalty Framework: What Has Changed
2. 2.The Cases: What Actually Happened to Real Directors
3. 3.What Courts Actually Consider When Setting Penalties
4. 4.The Business Judgment Rule: When It Works and When It Doesn't
5. 5.ASIC Lost Too: What Directors Can Learn
6. 6.Penalty Summary Table: Verified Case Outcomes
7. 7.Civil vs Criminal: ASIC's Dual-Track Enforcement
8. 8.If You Are a Director: What You Should Do Now

ASIC secured $349.8 million in civil penalties in the second half of 2025 alone. The penalties are getting larger, the enforcement is getting more aggressive and no director - executive or non-executive - is immune. Below, Astris Law examines the real cases, the real penalty amounts and the lessons every Australian director should take from them.

The Penalty Framework: What Has Changed

Before 13 March 2019, the maximum civil penalty for an individual director was $200,000 per contravention. The median penalty actually imposed by courts was just $25,000. The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 changed this dramatically.

For contraventions occurring after 13 March 2019, the maximum penalty is now the greater of:

• For individuals: 5,000 penalty units (approximately $1.65 million), or three times the benefit obtained or loss avoided
• For corporations: 50,000 penalty units (approximately $16.5 million), three times the benefit or 10% of annual turnover (capped at 2.5 million penalty units - over $825 million)

These are not theoretical maximums. ASIC is actively pursuing them. In ASIC v Noumi Limited [2025] FCA 1524, the company agreed to a $5 million civil penalty - and in a first, the Federal Court directed the penalty funds to class action group members rather than the Commonwealth.

The Cases: What Actually Happened to Real Directors

ASIC v Adler [2002] NSWSC 171 - HIH Insurance

Rodney Adler, a director of HIH Insurance, caused a HIH subsidiary to advance $10 million to a trust controlled by his associated entities. Part of those funds were used to purchase shares in HIH itself, propping up the share price. The transaction bypassed proper corporate safeguards and was initiated by Adler with the concurrence of CEO Ray Williams.

Duties breached: ss 180, 181, 182, 183 and the related party transaction provisions (ss 208, 209).

Penalties: Adler received a $450,000 pecuniary penalty, approximately $7 million in compensation orders (jointly with others) and a 20-year disqualification from managing corporations. Williams received a $250,000 penalty and a 10-year ban. The decision was upheld on appeal in Adler v ASIC [2003] NSWCA 131.

What happened next: ASIC then pursued criminal proceedings. Adler pleaded guilty and was sentenced to 4.5 years imprisonment (non-parole period of 2.5 years). This case illustrates that civil and criminal proceedings can both arise from the same conduct - the civil penalty is often just the beginning.

ASIC v Healey [2011] FCA 717 - Centro Properties

Eight directors and the CFO of Centro Properties Group approved financial statements that misclassified $1.5 billion in debt as non-current liabilities (when they were current) and failed to disclose US$1.75 billion in post-balance-date guarantees.

Middleton J held that directors have an "irreducible, non-delegable core duty" to read, understand and focus upon the content of financial statements before approving them. This duty cannot be entirely delegated to management or external auditors.

Penalties: CEO Andrew Scott received a $30,000 pecuniary penalty. CFO Romano Nenna received a 2-year disqualification. The six non-executive directors received no pecuniary penalties - only declarations of contravention and costs orders. Middleton J reasoned that the "widespread publicity" and reputational damage already suffered reduced the need for heavier financial penalties.

Why this matters for you: If you are a non-executive director who signs off on financial statements without independently verifying the key numbers, Centro confirms you have breached your duty of care. The court made clear that sitting on the board and trusting management is not enough.

ASIC v Cassimatis [2016] FCA 1023 - Storm Financial

Emmanuel and Julie Cassimatis were the sole directors and sole shareholders of Storm Financial, which operated a "one-size-fits-all" investment model involving double-gearing - home loans plus margin loans to invest in index funds. When markets collapsed, clients lost their homes and retirement savings.

The Cassimatises argued that s 180(1) does not apply when directors are the sole shareholders of a solvent company. This was rejected. The Full Federal Court in Cassimatis v ASIC [2020] FCAFC 52 held that shareholders cannot ratify or approve their own breach of s 180 - the duty is a matter of public concern, not private rights. The High Court refused special leave to appeal.

Penalties: $70,000 each, plus 7-year disqualification for both directors.

The "stepping stones" doctrine: This case established that directors can be personally liable under s 180(1) for failing to prevent the company from contravening another provision of the Corporations Act. If the company breaches the law because of the directors' failure to exercise care and diligence, the directors are liable for the company's contravention.

ASIC v Macdonald [2009] NSWSC 287 - James Hardie

The directors of James Hardie Industries approved an ASX media statement announcing that a foundation established to handle asbestos claims was "fully funded" when it was not. The statement was false or misleading.

CEO Peter Macdonald received a $350,000 penalty and 15-year disqualification. General Counsel Peter Shafron - notably not a director - received a $50,000-$75,000 penalty and 7-year ban for his role in failing to advise the board. Seven non-executive directors received penalties of $20,000-$30,000 each and disqualifications of approximately 2 years.

The High Court, in ASIC v Hellicar [2012] HCA 17, overturned the NSW Court of Appeal and reinstated findings against the directors - confirming that s 180(1) liability extends to senior executives and non-executive directors who fail to question obviously problematic public statements.

ASIC v Vocation Limited [2019] FCA 807

Vocation, an ASX-listed vocational education company, failed to notify the ASX that the Victorian Government had withheld approximately $20 million in payments and directed two subsidiaries to suspend all future student enrolments. This was clearly price-sensitive information.

CEO Mark Hutchinson received a $70,000 penalty and 6-year disqualification. Chairman John Dawkins AO received $25,000 and 2 years. CFO Manvinder Grewal received $30,000 and 3 years.

Key principle: The court confirmed that the decision not to disclose price-sensitive information is not a "business judgment" that attracts the s 180(2) safe harbour. Compliance decisions fall outside the business judgment rule.

ASIC v Star Entertainment [2022-2025, ongoing]

In December 2022, ASIC commenced proceedings against 11 current and former directors and officers of Star Entertainment Group for breach of s 180(1) in connection with anti-money laundering failures and junket operations. This is the first time in recent years that ASIC has pursued an entire board of directors rather than just executives.

In February 2025, former Chief Casino Officer Gregory Hawkins agreed to a $180,000 penalty and 18-month disqualification, and former CFO Harry Theodore agreed to $60,000 and 9 months. The trial for the remaining nine defendants has concluded with judgment reserved.

What Courts Actually Consider When Setting Penalties

The penalty amount is not arbitrary. Courts consider factors including:

• The nature and seriousness of the contravention
• Whether the conduct was deliberate, reckless or merely negligent
• The loss or damage caused to others
• Any benefit gained by the director
• The director's personal financial position
• Whether the director cooperated with ASIC
• The deterrence effect - both specific (to this director) and general (to the market)
• Reputational damage already suffered (as in Centro)

The Business Judgment Rule: When It Works and When It Doesn't

Section 180(2) provides a safe harbour - the "business judgment rule". A director satisfies the duty of care under s 180(1) if they:

The onus is on the director to establish all four elements (ASIC v Rich [2009] NSWSC 1229). In practice, the business judgment rule has been extremely rarely relied upon successfully. Critically, it does not apply to compliance decisions (ASIC v Vocation), monitoring and oversight duties or insolvent trading under s 588G.

ASIC Lost Too: What Directors Can Learn

Not every ASIC prosecution succeeds, and the cases where ASIC lost offer useful guidance for directors.

In ASIC v Rich [2009] NSWSC 1229 (OneTel), Austin J dismissed ASIC's case against Jodee Rich and Mark Silberman, finding that ASIC failed to prove its case on the balance of probabilities after one of the longest civil trials in NSW history. The case demonstrates the importance of ASIC being able to establish a clear causative link between the director's conduct and the alleged contravention.

In Forrest v ASIC [2012] HCA 39 (Fortescue Metals), the High Court unanimously cleared Andrew Forrest and Fortescue of misleading conduct charges, holding that ASX announcements describing "binding agreements" with Chinese state-owned entities were assessed from the perspective of a reasonable investor and did not make the representations ASIC alleged. Costs were awarded against ASIC.

Penalty Summary Table: Verified Case Outcomes

Civil vs Criminal: ASIC's Dual-Track Enforcement

ASIC can pursue either civil penalties or criminal prosecution for the same conduct. Criminal proceedings (referred to the CDPP) are reserved for offences involving dishonesty, intentionality or extreme recklessness. Civil penalties require only the balance of probabilities, while criminal matters require proof beyond reasonable doubt.

The Adler case is the clearest example of dual-track enforcement: ASIC first secured a $450,000 civil penalty and 20-year ban, then pursued criminal charges resulting in 4.5 years imprisonment.

Since the Hayne Royal Commission (2019) criticised ASIC for "rarely" going to court and relying on negotiated outcomes, ASIC has adopted an openly more aggressive enforcement posture. In the second half of 2025 alone, ASIC reported $349.8 million in court-ordered civil penalties.

If You Are a Director: What You Should Do Now

The case law makes clear that the following areas attract the most enforcement attention:

• Financial statements: You must personally read and understand them before signing off. Centro eliminated any excuse based on delegation to management or auditors
• ASX announcements and public statements: Every director is responsible for the accuracy of statements released in the company's name. James Hardie and Vocation confirm this
• Conflicts of interest and self-dealing: Adler remains the paradigm case for improper use of position. If you have any personal interest in a transaction, disclose it and recuse yourself
• Solvency monitoring: Directors must actively monitor the company's financial position and cannot hide behind ignorance. Insolvent trading under s 588G attracts both civil penalties and personal liability to creditors
• Non-financial risks: The Star Entertainment proceedings demonstrate that ASIC is now pursuing directors for failures in non-financial risk management, including AML/CTF compliance

If you are a director facing an ASIC investigation, have received notice of a potential contravention or need to review your corporate governance framework against the standards set by these cases, Astris Law's regulatory and compliance team can assist. We advise directors on ASIC investigations, compliance frameworks, governance reviews and defence strategies - with a practical focus on avoiding the outcomes you have read about above.

This article is for general information purposes only and does not constitute legal advice. You should seek professional advice tailored to your specific circumstances before acting on any information in this article. Liability limited by a scheme approved under Professional Standards Legislation.