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Author: Admin | 2025-04-27
This article was written by Georgia Sullivan, Kate Cincotta, Emily Lobban and Rob Tooth. Today, the High Court of Australia has provided important clarity on the definition of 'officer' in section 9 of the Corporations Act 2001 (Cth) (Act) in the much-anticipated decision of Australian Securities and Investments Commission v King [2020] HCA 4. In a judgment that will be well-received by ASIC, the High Court unanimously determined that there is no requirement that a person be a named officer of a corporation to fall within the ambit of section 9(b)(ii) of the Act. The relevant test will be a matter of fact and circumstance to determine whether a person has the requisite capacity to significantly affect the financial standing of the company. More importantly, for corporate groups, emphasis will be placed on the overall position of influence the person had within that group's affairs, rather than a strict reading of the "office" held by the person. Relevant statutory provision The term "officer of a corporation" is defined by s9 of the Act as follows: "officer of a corporation means: (a) a director or secretary of the corporation; or (b) a person: (i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (ii) who has the capacity to affect significantly the corporation's financial standing; or (iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation); or …" The facts Michael King was the Chief Executive Officer (CEO) and an executive director of MFS Ltd, which was the parent company of the MFS Group of companies (MFS Group). MFS Group's business included managing the Premium Income Fund (PIF), which was MFS Groups' largest registered managed investment scheme. MFSIM was the responsible entity of PIF. In that capacity, MFSIM entered into a $200 million facility with the Royal Bank of Scotland (RBS), which was to be used by MFSIM for the purposes of PIF. The High Court's interest was in a $130 million disbursement paid by MFSIM to MFS Administration Pty Ltd, which acted as the treasury company of the MFS Group. $103 million of this was paid from MFS Administration Pty Ltd to Fortress Credit Corporation (Australia) II Pty Ltd as funds drawn down from the RBS loan agreement. There was no agreement, consideration, or security in place, which meant that there was no guarantee that money which should have belong to PIF would be restored to it. The MFS Group subsequently collapsed leaving investors of PIF out of pocket a substantial amount. ASIC first commenced enforcement proceedings against senior executives of MFS, including Mr King, in 2009 alleging breaches of the Act. In relation to Mr King, ASIC alleged that he was an "officer" of MFSIM as he fell within definition of
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