The days of lax director participation in company matters could be over, if a recent Federal Court of Australia judgement is anything to go by. The ASIC v. Healey case highlights the importance of active participation by directors in the affairs of a company, rather than merely making appearances at board meetings. Here, company secretary services provider London Registrars (http://www.london-registrars.co.uk/) looks at the case and its ramifications.
In the case of ASIC v. Healey, the entire board of directors was found to have failed in their responsibilities, specifically – and somewhat dramatically – in failing to notice the omission of billions of dollars of short-term debt in the financial reports of a troubled retail investment company called the Centro Group, which was listed on the Australian Securities Exchange. The Australian Court stated that the board should have been actively involved in the reading of the Centro Group’s financial statements and should not have relied on third party professionals.
It was made clear by the court that it is the responsibility of all directors to take due care and carry out full due diligence in all company matters. Directors should have, at the very least, a basic understanding of all important areas of company business and, as evidenced by the case of ASIC v. Healey, have an enquiring and probing approach to all financial matters.
This case serves as a reminder to all directors, in the UK as well as in Australia, of the weight that their position carries and the fact that playing a passive role in board matters will not be accepted as justification for not having knowledge of any misconduct. It is the responsibility of directors, and not just the company secretary or indeed third party professionals, to carry out their duty of care obligations.
Find out more about the full range of corporate support services available from London Registrars at http://www.london-registrars.co.uk/.