High Court sets precedent on company officers’ accountability

ASIC MFS Investment Management corporations act 2001 John Price

12 March 2020
| By Jassmyn |
image
image
expand image

The High Court of Australia has set a precedent on the definition of a company’s “officer” whereby it has established that the former chief executive and executive director of MFS Ltd (also known as Octaviar), Michael Christodoulou King, was also an “officer” of its subsidiary.

The court said King was an officer as defined in the Corporations Act 2001 (Cth) of MFS Investment Management (MFSIM). MFS was the parent company of the MFS Group of companies and MFSIM was a subsidiary in the MFS Group and acted as a responsible entity for several registered managed investment schemes, the largest was the Premium Income Fund (PIF).

The court unanimously said King was defined as an officer because the provision was not limited to those who held or occupy a named office in a corporation or a recognised position with rights and duties attached.

An announcement by the Australian Securities and Investments Commission (ASIC), said the factual findings of the primary judge that King acted as the “overall boss of the MFS Group” and assumed “overall responsibility for MFSIM” were sufficient to establish that Mr King had the capacity to affect significantly the financial standing of MFSIM.

ASIC commissioner, John Price, said the decision sent a clear message to anyone running a company – in name or in effect – that they should be responsible and held accountable for their actions.

“It provides clear guidance on who is an ‘officer’ of a corporation and establishes that the duties and responsibilities to a company, its creditors and shareholders under the act will apply to individuals who have the capacity to significantly affect the financial standing of a company,” he said.

“The finding that King was an officer of the subsidiary MFSIM, marks the conclusion of long-running litigation which commenced in 2009 and demonstrates ASIC's commitment to pursuing difficult, long-running actions in the public interest.”

The court said: “It would be an extraordinary state of affairs if those who actually determine the course of a company's financial affairs could avoid responsibility for their conduct by the simple expedient of deliberately eschewing any formal designation of their responsibilities.

“This is especially so in the present case… to provide protection to members of managed investment schemes by imposing duties and responsibilities on the officers of responsible entities.”

King’s appeal arose from civil penalty proceedings against officers and a fund manager of MFSIM in connection with misappropriated funds used to pay debts owned by other entities in the MFS Group.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Interesting. Would be good to know the details of the StrategyOne deal....

3 days 23 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days ago

increased professionalism within the industry - shouldn't that say, FAR register almost halving in the last 24 months he...

4 weeks 1 day ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 3 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

2 days 21 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days ago