SHAREHOLDERS have praised the Federal Court's finding against the directors of property group Centro, but there remains confusion around directors' duties, expert say.
The Court found Centro's director breached the Corporations Act when they signed off on incorrect financial reports.
The Australian Institute of Company Directors chief executive officer, John Colvin, said the organisation is concerned about the ongoing confusion between the roles of non-executive directors and management.
In the case, Justice Middleton said: “There has been no suggestion that each director did not honestly carry out his responsibility as a director.”
Colvin said the Institute noted that the Federal Court has not determined whether any defendant should be relieved from liability and also whether any penalties should be imposed.
"It is important for all company directors to have an understanding of the business which they oversee, as well as a basic understanding of the financial position of the company.
"However, in an environment where the complexity of financial reporting standards and their application continues to increase, the role of company directors continues to become even more onerous," he said.
Colvin said the judgment reminds directors that they are entitled to rely on specialist knowledge and advice provided by management and external advisors but cautions directors that there are limits to that reliance.
"Board members should apply their individual, considered judgment to matters that are highly significant to the company before approving financial statements, and while we agree that, in the words of Justice Middleton, 'directors are an essential component of corporate governance', we are of the view, that it is not the role of non-executive directors to be involved in the day-to-day management of the company."
Colvin said Company Directors continues to review and analyse the full implications of the Court decision.