May 26, 2011
Performance by directors and officers of their statutory duties in the context of company compliance with continuous disclosure obligations has been the subject of scrutiny by the Courts recently at the instigation of the Australian Securities and Investments Commission (ASIC).
The Courts have been asked to determine whether company directors and officers conduct has satisfied the statutory duties imposed on them in relation to releases provided to the Australian Stock Exchange (ASX) which have been asserted to be misleading and deceptive, or likely to mislead or deceive.
This paper reviews the statutory framework of primary legal obligations owed by directors and officers and then examines the decisions made by the Courts in the ASIC v Fortescue Metals Group Ltd, James Hardie Industries NV v ASIC, Morley v ASIC and Morley v ASIC (No.2) / Shafron v ASIC (No.2) in respect to performance of directors and officers in those respective companies.
No attempt has been made to comment on every issue raised in these cases. Specific observations made by the Courts relating to director and officer conduct which provide guidance as to how directors and officers can be seen to perform, or fail to perform, their duties is the focus of this paper.