“I’m not a director therefore I’m not liable.” Are you sure about that?

 

In March 2020, the High Court of Australia made a decision in the matter of Australian Securities & Investments Commission v King and Anor which may have a wide reaching impact on ‘officers’ of a corporation/company.

 

An officer of a company is not necessarily a director or secretary of a company.  In this recent decision, the High Court has widened the category of those who are likely to be deemed as company officers to include third parties, for example, lenders, contracting counterparties, external advisers and consultants.  The test being whether the actions of those parties have had a history of directly or indirectly influencing or effecting steps taken by the company.

 

This essentially means that people who are not directors of a company but are in a position to influence and/or direct the operations of that company may be deemed officers of that company, and should tread with some caution.

 

The factors that a Court may take into account to determine whether or not a person is an ‘officer’ of a corporation include:

 

  • The identification of the role of a person in relation to the corporation;
  • What they did or did not do to fulfil that role; and
  • The relationship between their actions or inaction and the financial standing of the corporation.

 

Obviously the decision will be made on a case by case basis depending on a company’s size, structure and circumstance.

 

To read a more comprehensive overview of the case, click here

 

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