The recent decision in the Centro case confirmed that
directors must have some financial literacy in order to fulfil
their directors' duties when approving the accounts.
Basically, the accounts (prepared by a professional accountancy
firm) indicated some borrowings were non-current, but in fact there
were facilities of over $1.5 billion which were to be repaid within
12 months, which made them current liabilities.
The directors argued they'd relied on their accountants to
prepare the accounts, they couldn't be expected to know the
accounting terms in relation to liabilities and that the accounts
documents were complex. These arguments were rejected by the court
because:
- a director cannot exclusively rely on others in relation to the
financials, as it is a director's duty to consider the
information available before approving the accounts;
