Most boards I talk to think the modified liability period gives them three years of protection from climate disclosure risk.
It doesn’t work that way, and the gap between what directors assume and what the settings actually cover is where the real exposure sits.
I covered directors’ broader exposure to personal liability for directors in an earlier piece, and this is the follow-up question boards keep asking me since.
Key Takeaways
- Two time limits, not one: Forward-looking statements are protected for year one only. Scope 3, scenario analysis and transition plans are protected for three years (FY25 to FY27).
- Protected from lawsuits, not from ASIC: Private companies and individuals can’t sue you over it. The regulator still can.
- Five things it doesn’t cover: Statements outside the report, extra voluntary disclosures, misleading statements, reckless conduct, and criminal matters all stay fully exposed.
What boards are getting wrong about this period
The modified liability period sounds like an exemption. It isn’t one.
It’s a narrower, time-limited shield that applies to specific disclosures, and only against specific types of legal action. ASIC has been direct on this point. The settings are a transitional buffer to support better disclosure while the regime beds in, not protection for weak governance or poor controls.
Get the scope wrong, and a board can end up treating disclosures as low-risk when they’re still fully exposed.
What’s protected and for how long
Two protections apply, and they run on different clocks.
Every forward-looking climate disclosure carries reduced enforcement in the first reporting year. Scope 3 emissions, scenario analysis and transition plan disclosures carry it for three years, covering financial years starting from 1 January 2025 to 31 December 2027.
What the protection actually does is limit enforcement to the regulator. Private litigants can’t bring action over a protected disclosure during this period. ASIC still can, though the remedies available to it are narrower than they’ll be once the period ends.
What it doesn’t cover
The protection stops well short of the disclosures a director might assume are included. It doesn’t cover:
- Statements made outside the sustainability report itself, including the directors’ report or the operating and financial review
- Voluntary disclosures that go beyond what the Corporations Act or ASRS actually requires
- Statements that are misleading or deceptive
- Statements that are deliberately false or reckless
- Criminal proceedings, which sit outside this framework entirely
If your board is treating every climate-related comment as covered by this shield, that’s the exact gap ASIC is pointing at when it warns against reading this as a free pass.
What directors still have to sign
Directors still make a declaration about the sustainability report, and that requirement doesn’t disappear during the modified liability period. It changes shape instead.
For the first three years, directors only need to declare that the entity has taken reasonable steps to comply, rather than certifying full compliance outright.
That’s a lower bar for the declaration itself, but it isn’t a lower bar for oversight. A director’s duty to understand the business’s climate risk and govern the reporting process properly sits entirely outside the protected zone, and failures there carry full exposure regardless of the safe harbour.
Why this matters right now
Group 2 entities are moving through their first reporting cycles this year, and board-level questions about exactly what this protection covers are only going to increase from here.
Knowing the real boundary now means your board can focus its attention on the governance and data quality issues that sit outside the shield, rather than assuming three years of breathing room that was never actually on offer.
If you want a clear read on how the mandatory ASRS reporting requirements apply to your entity, and where your board’s real exposure sits, we encourage you to contact our team.
Frequently Asked Questions
Yes, the modified liability settings apply across all groups on the same terms. What differs between groups is the reporting start date, not the scope of the protection itself.
Not by private litigants, for the specific disclosures the period covers. ASIC can still take regulator action, and any disclosure outside the protected categories carries full liability as usual.
The modified settings fall away and the pre-existing liability arrangements apply in full. Boards that have used the transition period to strengthen governance and data quality are in a far better position when that happens than boards that treated it as an extension.
