Directors’ duties: A reality check – more than just an ornament!

A reality check is exactly what the decision of Federal Court judge Justice Middleton will bring for the hundreds of directors in Australia who sit on company boards.

Justice Middleton's use of the phrase 'a reality check' and his findings in the case ASIC initiated against eight Centro board members is a wake up call for all directors who fail to pay significant attention to the goings on of the companies over which they preside.

In a 130 page judgment, Justice Middleton found that the directors of the Centro board failed to perform their duties as directors with the level of care and diligence that the Corporations Act, 2001 (the Act) required of them.

The claim

ASIC's allegations against the eight defendant directors centred on the approval of consolidated financial statements of three Centro entities for the financial year ending June 2007. All directors, save for one, defended the allegations.