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Question: Explain On Range Of Duties by Directors and Officers? Answer: Introduction: This case is related with the range of duties by the directors and officers of the corporation. It is also known as Centro case. In this case, the Australian Securities and Investments Commission started proceedings in the court against the directors of Centro. These included two executive directors of the corporation and six were non-executive directors. Among the two executive directors were, the former, MD and CEO of the company as well as Chief Financial Officer. The ASIC, was seeking a declaration according to which there has been a breach of duty by the defendants. That is mentioned in section 180(1) as well as section 344(1) and 601FD(1). The duty mentioned in s180 is known as the duty of care and diligence. It was alleged by the ASIC that the above-mentioned duties were breached when the directors of Centro had approved the financial statements of the company for 2007. There was an error present in these financial statements as the death of 1.5 billion has been stated as the non-current liability of the corporation but the truth was that it was the current liability of the corporation. Similarly, these financial statements also failed to mention $1.7 billion in guarantees. Another significant fact that was pointed out in this case was that central management and Price Waterhouse Cooper with was the external auditor for this group and also examines the statements and the report prepared by the directors, but they also fail to find these mistakes. Hence, the court was faced with issues including the determination if the directors of a large corporations have certain additional requirements due to which they should apply their mind and carefully examined the proposed statements of the corporation and they should make efforts to ensure that all the information that has been mentioned in the report is dependable on the grounds of their personal knowledge concerning the affairs of the corporation. Similarly, another issue before the court was to consider if any significant error has been committed by the directors due to the reason that either they knew regarding these matters or they should have been known regarding these matters. In this case, the Commission alleged in the court that as a result of the conduct of these directors, it can be said that there has been a breach of section 180(1) and 601FD, as well as other provisions of the Corporations Act. At this point, it is worth mentioning that the duty that has been mentioned in s180(1) applies to the directors and officers of the corporation. It requires that the directors should fulfill their duties by applying the same care and diligence that can be expected from any other reasonable person, who is acting in the same position and under similar circumstances of the company. Section 601FD also imposes an obligation for the officers of responsible entity concerning registered scheme. The Commission also made a navigation in this case that the Centro directors were also liable for the breach of s344(1). The reason was that these directors have failed to take reasonable steps that are necessary to comply with or to secure the compliance of the company concerning the financial reporting obligations mentioned in the Corporations Act under sections 295A, 296, 297 and 298. Outline the duties/responsibilities (e.g. CA s. 181) breached and explain why the duties were breached It was the decision of the court in this case that the Centro directors have breached their duties and responsibilities. These included the duty that has been imposed on the directors were section 181. The court was of the opinion that this directors of Centro knew very well regarding the interest-bearing liabilities of the corporation. Similarly, all these directors were either aware of the relevant accounting principles or should have been aware of them, and consequently, these directors and should have been alerted that an apparent error exists in the proposed financial statements. In view of these findings, it was held by the court that there was failure on part of all the defendant directors to the reasonable steps for evaluating the proposed financial statements, particularly regarding the debts of the corporation, as well as the guarantees that need to be stated in these statements. It was also held by the court that there was the failure on part of these directors to make rea sonable inquiries from the audit committee or from the management of the corporation concerning the protected statements that have been made in the financial statements concerning the short-term debts/guarantees. In the same way, these directors could not amend these apparent errors present in the financial statements. After arriving at these conclusions, the court was of the opinion that all the defendant directors were liable for breaching their duty of care and diligence. Hence the findings of the report was that the Centro directors have breached their duty stated in s180(1) and 601FD. It was also helped by the court that the former directors have also failed to take reasonable steps for the purpose of ensuring that the financial reporting obligations of the corporation have fulfilled and, consequently, they were also liable for the contravention of section 344, Corporations Act. Discuss and critically ANALYSE the court/tribunal decision and the reason for the decision in view of the Corporations Act In this part of the assignment, the reasoning adopted by the court to decide the case has been analyzed, by applying the provisions of Corporations Act. This case was decided by the court by keeping in view, the fact that although it has been mentioned in the Corporations Act that the directors are allowed to delegate the work of the preparation of the accounts of the company to another person (Baxt, Fletcher and Fridman, 2008). Similarly, they are also allowed by the Business Law to delegate the other tasks related with the day-to-day affairs of corporation but it is worth mentioning that even in such cases, it is the responsibility of the directors to always examine the information placed before them. Among the responsibilities imposed on the directors by the law, it is also required that the directors should properly understand all the information that has been provided to them regarding the company. In case the director finds that they are not clear regarding certain information, it is the legal obligation of the directors to ask questions concerning it (Harris, Hargovan and Adams, 2013). This responsibility also exists when the directors are examining the proposed financial statements of their corporation. As a result of the importance of these duties of the directors, it is required that the directors should properly understand all the information that has been provided to them. In case there is some ambiguity regarding this information among the directors, they are legally required to make further inquiries. But the court found in this case that the financial statements of Centro contained certain apparent errors (Sweeney, OReilly and Coleman, , 2013). These errors cannot be described as a result of mere technical oversight. Consequently, if the directors of the company would have applied their mind to these statements, it would have been very easy for them to find the presence of these errors (ACCC v Leahy Petroleum Pty., 2009]). These were the circumst ances under which the court held the opinion that either this directors knew regarding these errors or they should have known regarding the fact that certain apparent errors can be found in these statements. The court also expressed the opinion to support its decision it was also stated by the court that keeping in view. The importance of these issues, it was necessary for the former directors of Centro that the financial statements of the Company should not be certified by them as true and fair. In this regard, the court also expressed the opinion that the former directors should not have allowed the publication of the annual reports of the company if it was clear that there are certain significant matters that fail to find mentioned in the report. The court also pointed out towards the fact in its judgment that, the law does not require from the directors to have intimate knowledge related with all the affairs of the corporation. Therefore the directors are permitted to delegate some of their duties to other persons (Compaq Computer Australia Pty Ltd v Merry, [1998). In the same way while performing their duties, it is permissible for the directors to take help from other persons (Dyers v The Queen, 2002). But it is worth mentioning that even if the directors are permitted to depend on the other persons for the fulfillment of their duties, it is also necessary that the directors should not rely too much on others for the fulfillment of these duties. The Corporations Act clearly states that if the directors are going to delegate some of their tasks to other persons, the delegation of work should be according to section 295(4). In view of these provisions, it becomes clear that although it is permissible for the directors to del egate some of their responsibilities to the persons but the final responsibility will be of the directors only. The effect of this judgment can be described as a reminder for the directors regarding their obligation that they should play an active role in the financial management of the corporation. In the same way, the responsibility has been imposed on the directors to ensure that they properly understand all the information that has been placed before them. The directors should also ask questions regarding information if there is anything presented the information that is not clear to them. It will not act as an excuse if the directors Martin claimed that they had relied on the ground and regarding the financial statements of the corporation and the statements are automatically signed by them by assuming that the statement was correct. The court stated that it is the core requirement imposed on the directors that they should play an active role in the management of the corporation. Similarly, they have an obligation to take all reasonable steps so that they may be in a position where they can guide and monitor. In view of these legal obligations, it becomes the responsibility of the directors to read, understand and focus on the information that is present in these reports as an obligation has been imposed by the law on all the directors to approve or adopt these reports. Therefore, it is necessary that the financial statements of the corporation are carefully read and understood by the directors. Such reading and understanding of the financial reports will need that the director should consider if the financial statements placed before them are consistent with their own knowledge regarding the financial position of the corporation. This accumulated knowledge is the result of several responsibilities that have been imposed on the directors while performing the role and function of the director in the corporation. These include that the director should have at least a basic understanding concerning the business of the company. Similarly it is also required that the directors should be familiar with the fundamentals of business of the corporation. The director is also under the legal obligation to remain informed regarding the activities of the company, although it is not necessary that the director should be aware of the day-to-day activities of the corporation but the affairs and policies of the corporation should be closely monitored by the directors. In the same way, the directors should be familiar with the financial status of the company by regularly reviewing and understanding the financial statements. Although it is true that a director is not and monitor but still it is necessary that the director should have a questioning mind. The duty imposed on the directors to pay attention to the affairs of the company is not relieved. Even if such affairs are beyond the area of expertise of the directors. What is expected from the directors in such a case is that they should take deligent interest in the information placed before them, understand the information and apply an inquiring mind to these responsibilities. References Baxt, R, Fletcher, K Fridman, S 2008, Corporations and associations: cases and materials, 10th edn, LexisNexis, Butterworths, Sydney, New South Wales Harris, J, Hargovan, A Adams, M, 2013, Australian corporate Business Law, 4thedn, LexisNexis Butterworths, Chatswood, New South Wales Sweeney, B, OReilly, J Coleman, A, 2013, Law in Commerce, 6thedn.2015, Australian Corporations Legislation, LexisNexis Butterworths/CCH (Vol 1) Case Law Australian Competition and Consumer Commission v Leahy Petroleum Pty [2009] FCA 1678 Commercial Union Assurance Co of Australasia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 (CA) Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968 Dyers v The Queen (2002) HCA 45