What’s in a name? High Court stipulates broad definition of company “officer”
In the recent case of ASIC v King & Anor, the High Court has held that the definition of “officer” under the Corporations Act 2001 (Cth) (Corporations Act) is not limited to persons who occupy a recognised “office” within a company. Whether someone is an officer must be determined by reference to the facts and circumstances of their involvement in a company’s affairs. The decision has particular significance for corporate groups, as the actions of a person in an overall position of influence in relation to a particular group company can mean they are an officer of that company.
Michael King was the CEO and executive director of MFS Ltd, a formerly listed public company that was the parent company of the MFS group of companies (MFS Group). MFS Investment Management Pty Ltd (MFSIM) was the responsible entity of Premium Income Fund (PIF), a managed investment scheme which was the “flagship fund” of the MFS Group.
Mr King and other senior personnel of MFSIM arranged for the company to draw down $150 million on an existing loan facility. The monies were used to pay the debts of other MFS Group companies, with no consideration, promise of repayment or security to PIF, leaving PIF and its investors at risk.
The principal issue in the High Court appeal was whether Mr King was an “officer” of MFSIM and could therefore be held liable by ASIC for breaching duties placed on officers under the Corporations Act.
The Corporations Act defines officer as:
Mr King was not a director of MFSIM at the time of the relevant conduct, having ceased to be a director in 2007.
ASIC contended that notwithstanding Mr King was not a director of MFSIM at the relevant time, he was nonetheless an “officer” of that company being “a person…who has the capacity to affect significantly the corporation’s financial standing”.
The primary judge’s finding that Mr King acted as the “overall boss of the MFS Group” and assumed “overall responsibility” for MFSIM was not in dispute.
Mr King argued that he was not an officer of MFSIM because his ability to affect the company’s financial standing did not derive from his occupation of an “office” within the company, in the sense of a recognised position with rights and duties attached to it. The Queensland Court of Appeal found in favour of Mr King in this regard and overturned the primary judge’s decision. ASIC then appealed the decision to the High Court.
The High Court reversed the Queensland Court of Appeal decision and held that: