QUESTION: In ASIC v Healey  FCA 717 at  Middleton J stated:
A director is an essential component of corporate governance. Each director is placed at the apex of the structure of director and management of a company. The higher the office held by a person, the greater the responsibility that falls on 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.
Under the Corporations Act 2001 anyone who is over 18 and not disqualified can be a director. Is it appropriate that there be no qualifications for directors? Should there be different requirements for directors of ...view middle of the document...
’ The Corporations and Securities Industry Bill of 1976, would have enabled regulations specifying ‘the qualifications and experience to be possessed by directors of corporations,’ had it been successful. On July 1 2004, s 300(10)(a) of the Corporations Act 2001 took effect, requiring that the annual report for a public company disclose ‘each director’s qualifications, experience and special responsibilities.’ It is evident that a higher standard is required of directors presently than in the past: ‘[a]s the complexity of commerce has gradually intensified…the community has of necessity come to expect more than formerly from directors.’ Directors are at least expected to fulfil a minimum role. The standard expected of directors by the Corporations Act 2001 is comparable to international standards, such as the OECD Corporate Governance Principles and the United Kingdom Corporate Governance Combined Code.
IS IT APPROPRIATE THAT THERE BE NO QUALIFICATIONS FOR DIRECTORS?
The onerous obligations imposed on directors ‘provide a standard by which the public’s legitimate interest in accountability can be achieved.’ Invariably, directors must posses a certain degree of skill and competence to satisfy their obligations, thereby making positive qualifications unnecessary. Mr Loton, former Managing Director of BHP, stated that not all of the BHP directors have tertiary qualifications; the position is appointed to the ‘best person available.’ Sections 180-184 of the Corporations Act 2001 require directors to act reasonably, with care and diligence, in good faith, for proper purposes and in the interests of the company. Adherence to these legal standards is vital for Australian directors because their actions must be accountable to shareholders, employees, creditors and the public. Shareholder class actions are becoming increasingly prevalent, with companies such as Aristocrat Leisure Ltd and Multiplex being held accountable for providing misleading statements and failing to disclose material information. Hence, company directors are being subjected to increasing scrutiny.
The courts have demonstrated that a director has a minimum responsibility: ‘there is a basic duty on all directors to understand the financial position of the company, regardless of their financial sophistication and training in accounting. Directors need not be experts in accounting. In ASIC v Healey, Middleton J stated that ‘a director should acquire at least a rudimentary understanding of the business’ and ‘maintain familiarity with the financial status of the corporation.’ Thus, the legislative requirements ensure that the standard of conduct of Australian directors is sufficient without the need for professional qualifications. As noted in ASIC v Healey, many of the non-executive directors ‘rose through the ranks of commercial life’ and did not have a tertiary education. In finding the directors liable, Middleton J stated that ‘all that was required of the directors in this...