Centro case study

There was no evidence that the directors had formed that view. The Court then held that the directors had breached their duties by not taking all reasonable steps to ensure compliance with section A.

ASIC successfully argued that the document provided to the Centro board did not comply with this requirement. The section A certificate Section A says that the directors of a listed company cannot make their section 4 declaration unless the CEO and CFO have declared that, in their opinion, the annual accounts comply with the accounting standards among other things.

Despite the efforts of the legal representatives for the directors in contending otherwise, the basic concepts and financial literacy required by the directors to be in a position to properly question the apparent errors in the financial statements were not complicated.

The reading of financial statements by a director is for a higher and more important purpose: This accumulated knowledge arises from a number of responsibilities a director has in carrying out the role and function of a director.

The Court has not yet decided whether any defendant should be relieved from liability for such contraventions and the imposition of penalties if any. The value of Centro securities has substantially reduced.

Access Denied

Reliance The Court said that the importance of the annual accounts and the fact that the Corporations Act places specific responsibilities upon directors in relation to the accounts means that directors cannot delegate those responsibilities: The information was provided to the directors by management for a reason.

The scrutiny by the directors of the financial statements involves understanding their content. Even so, a director, whatever his or her background, has a duty greater than that of simply representing a particular field of experience or expertise.

A director is an essential component of corporate governance. The role of a director is significant as their actions may have a profound effect on the community, and not just shareholders, employees and creditors.

Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Any push-back by the board on this front may encounter resistance from management.

The directors argued that they could not be expected to know that the liabilities in question were current liabilities within the meaning of the relevant accounting standards.

The omissions in the financial statements the subject of this proceeding were matters that could have been seen as apparent without difficulty upon a focussing by each director, and upon a careful and diligent consideration of the financial statements. Each director is placed at the apex of the structure of direction and management of a company.

Because of their nature and importance, the directors must understand and focus upon the content of financial statements, and if necessary, make further enquiries if matters revealed in these financial statements call for such enquiries.

I do not consider this requirement overburdens a director, or as argued before me, would cause the boardrooms of Australia to empty overnight.

What does the Centro case mean for directors?

What each director is expected to do is to take a diligent and intelligent interest in the information available to him or her, to understand that information, and apply an enquiring mind to the responsibilities placed upon him or her.

The Court dismissed these arguments. However, I have found, in the specific circumstances the subject of this proceeding, that the directors failed to take all reasonable steps required of them, and acted in the performance of their duties as directors without exercising the degree of care and diligence the law requires of them.

Directors are generally well remunerated and hold positions of prestige, and the office of director will continue to attract competent, diligence and intelligent people. Share and print this article Share Print Directors must scrutinise company accounts.

Related Expertise Related knowledge information is loading Site Information. The case law indicates that there is a core, irreducible requirement of directors to be involved in the management of the company and to take all reasonable steps to be in a position to guide and monitor.

There is a responsibility to read, understand and focus upon the contents of those reports which the law imposes a responsibility upon each director to approve or adopt.Among questions raised in the Centro case were the degree to which shareholders could rely on company announcements, Professor Ramsay said.

Another issue is the extent to which a company’s. Centro (ASIC v Healey) case note: directors’ duties for financial statements. Category: Corporations Act, Corporate governance | 29th June, by David Jacobson. Bright Law is the business name of Bright Legal Services Pty Ltd ABN | Legal advice to Bright Law customers is provided through Bright Corporate Law | The liability.

Marshall's recommendation was to position Centro as experts in an area that had relevance to advertisers, agencies and publishers, but did not appear to be competitive with any of them. Centro In All Case Studies / Brand Architecture / Messaging Strategy / Positioning Strategy.

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Centro case study
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