Tuesday, October 8, 2024

When exactly is a director being a reasonable (man)**?

View Legal blog - When exactly is a director being a reasonable (man)**? by Matthew Burgess

Posts over the last 2 weeks have looked at various aspects of the business judgment rule, leveraging the lessons explained in the decision of ASIC v Mariner Corporation Ltd [2015] FCA 589.

This case also explains when a director will be held to have acted reasonably as part of relying on the business judgment rule.

In particular, the court confirmed that the reasonableness of a director's belief should be assessed by reference to the:
  1. importance of the business judgment to be made;
  2. time available for obtaining information;
  3. costs related to obtaining information;
  4. director or officer’s confidence in those exploring the matter;
  5. state of the company’s business at that time and the nature of competing demands on the board’s attention;
  6. evidence available as to whether or not material information is reasonably available to the director.
As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the National song ‘Reasonable Man’.

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Tuesday, October 1, 2024

Avoid being on your own** (A safe Harbour in the Mariner, Part II)

View Legal blog - Avoid being on your own (A safe Harbour in the Mariner, Part II) by Matthew Burgess

Last week’s post summarised the leading Corporations Act case of ASIC v Mariner Corporation Ltd [2015] FCA 589. This post further considers the business judgment rule in more detail.

While the key principles in relation to the business judgment rule have remained largely constant for many years, ASIC v Mariner was the first case where the rule would have been successfully relied upon if the directors had been found to have breached their directors’ duties.

The business judgment rule, under section 180(2) of the Corporations Act 2001 (Cth) provides that a director will discharge their duties whenever a decision is made in good faith, for a proper purpose, after a director fully informs themselves that the decision is reasonable and rational.

Importantly, pursuant to section 189 of the Corporations Act, a director may rely on information provided by a co-director, if they do so in good faith, after having made an independent assessment of it

At a practical level, the ability of a director to rely on the business judgment rule will depend largely on the records kept in relation to a decision. This means comprehensive meeting and diary notes in relation to board decisions are critical.

As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Blur song ‘On your own’.

View here: