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Being involved in a company can come with certain legal obligations, depending on your role and level of control and influence over the company. The High Court’s decision in ASIC v King clarified and broadened the scope of the meaning of a company officer, and it has a few consequences for those involved in a company’s affairs, whether or not you have an official title. This article discusses the meaning of a corporate officer and whether your company needs one.
Who is an Officer?
Every company needs at least one officer in Australia – private companies need one director and public companies need at least three directors.
The term “officer” is broad and covers the following people:
- directors;
- company secretaries;
- anyone who has the capacity to affect the company’s financial standing;
- receivers;
- administrators;
- restructuring practitioners;
- trustees; or
- liquidators.
How Do I Know if I Am an Officer?
You will fall under the definition of a corporate officer if the following applies:
- you have signed a Consent to Act as a director or a company secretary; and
- your name is listed on the company’s internal documents; or
- you are listed with ASIC as occupying one of these roles.
The decision highlighted that a CEO of a parent company could be held to be an officer of a subsidiary in a vast network of companies. While the CEO did not hold any official title within the subsidiary company, they had:
- a degree of influence over the company; and
- the capacity to affect the company’s financial standing.
Ultimately, not only can key employees in positions of influence be captured by the shadow director provisions as a company officer, but a court can also classify them as an officer based on their level of control over the company’s direction and finances.
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ASIC v King
Corporations and individuals should keep in mind that just because someone does not have an official title, it does not mean they cannot significantly affect a corporation’s financial standing. The decision of ASIC v King serves as a cautionary reminder to both third parties and company associates in non-official positions who engage in corporate strategy, financing and corporate affairs.
The Court held that the term “officer” is not limited to those with an official title or recognised position within the business. Notably, even individuals in middle management positions can meet the threshold. This is particularly true in some refinancing or restructuring contexts, where unusual circumstances allow for certain individuals to step up and assume responsibilities they may not otherwise have or be assumed to hold. Where this is the case, and an individual is found to be an officer, they will owe the company certain duties.
If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.
Additionally, financial advisors and consultants can also fall under the definition of a corporate officer. The determining factor is not whether these key personnel advise and have an influence over the direction of the company.
The case of ASIC v King provides greater clarity on the definition of a corporate officer in Australia. However, determining each case will be unique and depend on questions of fact and degree.
Key Takeaways
If you are involved in a company or corporate structure, it is important to clarify your expected powers and responsibilities. It is irrelevant whether your powers have come from a formal designation or not. Likewise, evaluate your level of control over the direction of a company. Indeed, these may evolve over time, either through promotion or due to unforeseen circumstances. However, they are worth keeping track of so you are not unexpectedly caught by the expanded officer definition. If a court deems you are a corporate officer, you will owe legal duties to the company.
If you need help understanding your corporate obligations our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Every company needs at least one officer in Australia. Private companies need one director and public companies need at least three directors.
Traditionally, you will fall under the definition of an officer if you have signed a Consent to Act as a director or a company secretary. Likewise, if your name is listed on the company’s internal documents or with ASIC as occupying one of these roles, you will be an officer. However, the High Court has recently held that the term “officer” is not limited to those with an official title within the business. Relevantly, a court will consider your degree of influence over the company and capacity to affect its financial standing.
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