A recent decision handed down by the High Court of Australia has shed light on the scope of what constitutes the definition of an ‘Officer’ of a corporation.

In the matter of ASIC v King [2020] HCA 4, the High Court of Australia considered the question of whether a person who is not named as an officer, or is not in the position of an officer, can fall within the definition of an officer of a company for the purposes of the Corporations Act 2001 (Cth) (Act).

Background

The facts of the case revolve around a parent company, MFS Ltd (MFS), and one of its subsidiary companies, MFS Investment Management Pty Limited (MFSIM).

Several transactions were made by MFSIM for purposes that were unrelated to the intended use of the money. Mr King was an executive director and CEO of MFS, and he also assumed overall responsibility of MFSIM.

Mr King was not however, a named director or secretary of MFSIM however he approved and authorised the transactions in question, and the subsidiary company’s money would not have been transacted without Mr King’s approval.

Who Is an “Officer” of a Corporation?

Section 9(b) of the Act defines an Officer of a corporation as a person:

  • who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
  • who has the capacity to affect significantly the corporation’s financial standing.

Decision

ASIC argued that Mr King had the capacity to significantly affect the corporation’s financial standing, satisfying section 9(b) of the Act, and therefore constituted an Officer of MFSIM.

The Queensland Court of Appeal disagreed, and held that Mr King was not an Officer of MFSIM because he did not hold “a recognised position with rights and duties attached to it” [16].

The High Court however, unanimously rejected the Court of Appeal’s argument and allowed ASIC’s appeal.

The High Court adopted a more literal reading of s 9(b)(ii), focusing on the fact and degree of the person’s relationship and involvement in the management of the corporation’s affairs or property to determine whether they are an Officer of the corporation.

The Court concluded that a person who does not have to occupy or hold a named office in the company can still be an Officer.