Modified liability is a transitional setting in the Corporations Act that recognises the uncertainty in early climate reporting. For protected statements, no legal action other than criminal action, or action by ASIC, can be brought. In practice, investors and other third parties cannot bring private claims over a protected statement while the protection applies.
Key points
- Only ASIC, or a criminal proceeding, can act on protected statements
- Scope 3, scenario analysis and transition plan statements protected for years beginning 1 January 2025 to 31 December 2027
- All forward-looking climate statements protected for years beginning in 2025
- Applies only to statements in the sustainability report or auditor's report
- Directors declare reasonable steps rather than compliance for years beginning up to 31 December 2027
Which statements are protected
| Statements | Protected for financial years beginning |
|---|---|
| Statements about Scope 3 emissions, scenario analysis and transition plans | 1 January 2025 to 31 December 2027 |
| All statements relating to climate that are about the future | 1 January 2025 to 31 December 2025 |
Where the protection applies
Protection applies only to statements made in the sustainability report for the purpose of complying with a sustainability standard, or in the auditor’s report. Statements made in other documents fall outside this protection, even if they repeat the content of the sustainability report.
What it does not do
- It does not remove criminal liability.
- It does not stop ASIC from taking action.
- It does not cover Scope 1 and Scope 2 emissions, governance or risk management statements, other than forward-looking statements in the first window.
- It does not change what AASB S2 requires to be disclosed.
The directors’ declaration in the same window
For financial years beginning between 1 January 2025 and 31 December 2027, directors declare that the entity has taken reasonable steps to ensure the sustainability report complies. From financial years beginning on or after 1 January 2028, directors declare whether the report is in accordance with the Corporations Act and AASB S2, in line with the declaration on the financial statements.
Why it matters for asset-intensive operations
The window is short. Scope 3 inventories, scenario analysis and transition plans built during these years become fully exposed statements afterwards, so the evidence behind them should already meet the standard expected once protection ends. Keeping the source data, assumptions and approvals for each protected statement makes the step from protection to full liability an orderly one.
References & sources
Primary regulatory documents and authoritative references underpinning this answer.