Is Australian corporate law fit for purpose?

What is the appropriate role of purpose in Australian corporate law and should the Australian Corporations Law be reformed to enable and empower purpose-based corporations?

Is the current system of directors’ duties in Australia sufficient in light of new environmental, social, cultural and technological issues and challenges?

Melbourne Law School’s newest ARC Future Fellow, Professor Rosemary Langford, will now embark on a four-year corporations law project unpacking these questions, after she won one of only two law-based grants awarded in the recent round.

Corporate purpose has been described as one of the hottest public policy issues of our time. Yet the extent to which Australian companies and directors can pursue purposes beyond profit is contested. In addition, society now expects corporations and directors to consider important social, cultural and environmental concerns (such as sustainability, climate change, biodiversity and human rights) rather than focusing exclusively on the pursuit of profit.

Professor Langford, Harold Ford Professor of Commercial Law and Director of Melbourne Centre for Commercial Law, says it is difficult for Australian companies and directors in this space because Australian corporate law is not fit-for-purpose.

“There is an intense focus on corporate purpose across the world in light of increasing societal expectations that corporations and directors take account of important social, environmental and cultural concerns,” she said.

“The project will make recommendations to modernise key aspects of Australian corporate law to enable companies and their directors to pursue broader purposes, as well as recommendations to clarify the scope of directors’ duties in relation to social, cultural and environmental concerns.

“It will also make recommendations to reduce complexity and uncertainty for both for-profit and not-for-profit companies and for directors in simplifying Australia's complex corporate law regime.”

ARC funding for Professor Langford’s project Purpose beyond Profit: Modernising Corporations Law, was announced on July 9.

Professor Langford recently completed an ARC Discovery Early Career Researcher Award project focussed on the governance and regulation of charities - Restoring Public Trust in Charities – Reforming Governance and Enforcement.