ASIC may pursue case alleging Commonwealth Bank directors breached duties
Did directors weigh up the risks to the bank's reputation when deciding how to respond to AUSTRAC's allegations? Was there continuous disclosure to the sharemarket about the AUSTRAC allegations, and also accounting disclosure in regards to contingent liability?
In 2016, Justice Edelman said directors duties included protecting a company's reputation. This was in the court case ASIC v Cassimatis, where the regulator alleged the directors of Storm Financial breached their duties of care and diligence. It won.
In his judgment, Justice Edelman wrote: "A corporation has a real and substantial interest in the lawful or legitimate conduct of its activity independently of whether the illegitimacy of that conduct will be detected or would cause loss. One reason for that interest is the corporation's reputation. Corporations have reputations, independently of any financial concerns, just as individuals do."
Justice Edelman continued: "I conclude that the foreseeable risk of harm to the corporation which falls to be considered in s 180(1) is not confined to financial harm. It includes harm to all the interests of the corporation. The interests of the corporation, including its reputation, include its interests which relate to compliance with the law."
Under section 180(1) of the Corporations Act a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a company or had the same responsibilities within the corporation as the director or officer.
LWP Price at posting:
0.1¢ Sentiment: None Disclosure: Held
