Directors’ Duties have proven to be more Onerous

A recent Federal Court finding has concluded that the directors of property group Centro was in breach of the Corporations Act when they signed off on incorrect financial reports. While the decision has garnered praises and joy from shareholders, experts are quick to warn of the cloud of confusion that encapsulates directors’ duties.

The Australian Institute of Company Directors chief executive officer, John Colvin, expressed his concern over the increasing confusion in court decisions between the roles of non-executive directors and management. He is quoted to have said "It is important for all company directors to have an understanding of the business which they oversee, as well as a basic understanding of the financial position of the company.

"However, in an environment where the complexity of financial reporting standards and their application continues to increase, the role of company directors continues to become even more onerous." Colvin expressed his concerns that the decision would serve only as a reminder to directors that they must be ever vigilant when relying on expert knowledge and advice from specialists. Ultimately though, as this case has demonstrated, the directors are still held accountable regardless of how sincere their reliance on the specialist knowledge was.

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