The Federal Court has delivered its decision in the case against eight directors and former executives of Centro Properties Group.

The decision

It was found that the directors of Centro approved the 2007 Annual Reports for Centro Properties Group and Centro Retail Group knowing that short-term liabilities had been re-classified as non-current liabilities.

The court found that, while the directors did not act dishonestly, they failed to take reasonable steps, and did not exercise the degree of care and diligence that was required of them by law. They knew, or should have known about these significant matters.

Directors are expected to use the skills and experience gained as directors in exercising their duties; they must carefully read and understand financial statements before they form opinions which will be published

In his decision, Middleton J said,

‘A director is an essential component of corporate governance. Each director is placed at the apex of the structure of direction and management of the company. The higher the office that is held by a person, the greater the responsibility that falls upon him or her. 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.’

ASIC Chairman, Greg Medcraft, welcomed the decision, saying that it sends a clear message about the legal duties of directors and management and is a clear message to boardrooms about corporate accountability.

A penalty hearing is to be scheduled.

For further information:

See the ASIC media release here 11-125MR

Link to the Federal Court judgment here Australian Securities and Investments Commission v Healey [2011] FCA 717 (27 June 2011)