A company is more than just its board of directors – there are many key figures making management decisions on a day-to-day basis that impact a company’s growth including your executive management team (CEO, CFO, COO etc) as well as “officers”. “Officers” bear many of the same responsibilities as directors, yet their significance can be overlooked. Officers are not necessarily appointed, and individuals can be regarded as officers depending on their influence within the company, just like shadow or de facto directors.
Certain individuals are prescribed by the Corporations Act 2001 as officers of a corporation. These individuals include:
Individuals falling into the categories mentioned in 2, 3 and 4 above do not need to have a formal title or designation of their responsibilities.
All officers must comply with the following duties:
There are various consequences that stem from a breach of these duties under the Corporations Act, both criminal and civil. A Court may order a person to pay a penalty, disqualify the person from being a director, or hold them personally liable for any loss caused. Criminal charges may also apply for certain breaches. It is important to note that ‘officers’ do not have a duty to prevent insolvent trading (that duty is limited to directors).
If this occurs, those acting as an officer (and not formally appointed) may not be covered on the Directors and Officers Liability Insurance, and suffer personal risk or exposure for the individual, as well as the company. Furthermore, the company may still be bound by the decisions of the officer despite the lack of formal authority, and thus incur liability through contracts or breaches of law.
Shafron v ASIC involved the James Hardie group of companies, and the establishment of a compensation fund for asbestos related claims. The ASX received the required disclosures from James Hardie, however it was argued the disclosures to the market were misleading in several areas. Mr Shafron, the general counsel of James Hardie, failed to advise the board of certain disclosure requirements, as well as the limitations of the study he commissioned to determine the sum of asbestos payouts (which resulted in the gross underfunding of the fund by $1.3 billion). Not only was Mr Shafron part of the team that founded and presented this separation proposal, significant announcements required his approval, and he had authority to finalise agreements on behalf of James Hardie in connection to this proposal. The Court founds that this participation in the decision making, which affected a substantial part of the James Hardie business, meant that he was an ‘officer’ of the company and liable for the misleading statements.
In ASIC v King Mr King was the chief executive officer of MFS Ltd which had several managed investment schemes as part of its group, notably a fund called PIF. MFS entered into a $200 million loan with the Bank of Scotland to be used for the purposes of the PIF only. Mr King as CEO then approved MSF using $130 million of the loan to pay the debts of other companies part of the MFS group for which PIF was not liable. Given this significantly affected the company’s financial standing, the Court determined that whilst he was not a director, he was an officer of MFS. It is important for all companies to identify those individuals (within their staff or third party advisers) who would be regarded as officers, and either educate them on their duties and obligations, and ensure they are protected by insurance, or to take steps to ensure that they are not officers and the Board retains control of the decisions which affect the company.
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First published on 21 June 2023.
 Corporations Act s.9
 Australian Securities and Investments Commission v King  HCA 4
 See Division 1, Part 2D.1 of the Corporations Act
  HCA 18
 Morley v ASIC  NSWCA 331 at [893-895]
  HCA 4