Directors Liability

The recent decision in ASIC v Healey & Ors [2011] FCA 717 highlights the role and duties of directors
Justice Middleton held relevantly that (with emphasis added):
“Directors are entitled to delegate to others the preparation of books and accounts and the carrying on of the day-to-day affairs of the company. What each director is expected to do is to take a diligent and intelligent interest in the information available to him or her, to understand that information, and apply an enquiring mind to the responsibilities placed upon him or her. Such a responsibility arises in this proceeding in adopting and approving the financial statements. Because of their nature and importance, the directors must understand and focus upon the content of financial statements, and if necessary, make further enquiries if matters revealed in these financial statements call for such enquiries.”

The message is that as a director, even a non-executive director, you cannot merely rely on experts (accountants, auditors, financial advisers) in approving financial statements or otherwise directing the course of the company. Each director must engage with the information available to him in the manner highlighted above.