Most Read Contributor in Australia, September 2016
The recent decision of the Federal Court in ASIC v
Australian Property Custodian Holdings Limited shines a light
on decision making in the boardroom and corporate record
This is a must read case for directors and particularly
directors of responsible entities. In this case ASIC brought
proceedings against the Company and each of its directors alleging
breaches of duties owed in the capacity as responsible entity of
the Prime Retirement and Aged Care Property Trust.
The decision of Murphy J outlines the nature of the duties of a
responsible entity and the directors of the responsible entities
and held that the company and its directors at the relevant time
breached a number of statutory duties that they owed to the Prime
In the context of boardroom conduct the decision considered in
detail the value of consensual decision making as against the
obligation of each individual director to form and make known a
The case is a timely reminder that:
The minutes recording the board meeting should record
discussions of important matters.
Those who prepare and approve board minutes are obliged to
exercise a high standard of care.
Each Director is required to actively support a resolution,
actively oppose it or expressly abstain from supporting or opposing
it, and it is his or her responsibility to ensure that his or her
will is expressed and recorded in one of those ways.
The practice of a chairman who does not call for votes for and
against but merely states "I think we are all agreed on
that" and accepts silence as assent falls short of the
standard required by the Court. A director's responsibility is
to ensure that his or her will is clearly expressed and accurately
recorded and the responsibility is amplified with the importance of
Section 1308(2) of the Corporations Act makes it an offence to
make a statement in a document required by or for the purposes of
the Corporations Act which is false and misleading in a material
particular. Company minutes are such documents. Section 1308(4)
makes it an offence for the directors, and the company secretary,
not to take all reasonable steps to ensure that a statement in such
a document is not false and misleading.
Section 251A of the Corporations Act strictly requires the
minutes to be placed in the minute book within one month.
It is an offence for a director of a public company to be
present while the board considers a matter in which he or she has a
material personal interest, or to vote on a matter. This means that
a public company director should disclose the matter, should leave
the boardroom before the meeting begins to consider the matter,
should not speak to the matter under decision, and should not be
present when the vote is taken and, of course, should not vote on
the matter. For director of a private company there remains the
obligation to fully disclose the nature and extent of the
This piece has also been published in the Australian Institute
of Company Director's Boardroom Report. Please see
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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