Section 9 of the Corporations Act provides that an ‘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
(c) a receiver, or receiver and manager, of the property of the corporation; or
(d) an administrator of the corporation; or
(e) an administrator of a deed of company arrangement executed by the corporation; or
(f) a liquidator of the corporation; or
(g) a trustee or other person administering a compromise or arrangement made between the corporation and someone else.
As was noted by the High Court in Australian Securities and Investment Commission v King [2020] HCA 4; (2020) 376 ALR 1 at [44], the language used in para (b)(i) and (ii) of the definition is a statutory statement, the origins of which are to be found in the meaning given by the courts to the notion of being concerned in, or taking part in, the management of corporations. In Commissioner for Corporate Affairs v Bracht [1989] VR 821, Ormiston J considered whether an individual was concerned in or took part in the management of a corporation within the meaning of s 227(1) of the Companies (Victoria) Code and held at 830 that for the purposes of that provision:
"[T]he concept of 'management' ... comprehends activities which involve policy and decision‑making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs."
Interestingly, the definition in section 9 does not refer to specific types of officers, but rather uses a general definition which identifies people by what they do or what they can do rather than their designated status. With respect to identifying the persons who are ‘officers’ of corporations, several questions arise out of the statutory definition in s 9. among those questions are the following:
First, what is involved in the making of or participation in decisions that affect the ‘whole or a substantial part of the business of the entity’?
Second, by what criteria can an assessment be made of the ‘capacity to affect significantly the entity’s financial standing’?
In Australian Securities and Investment Commission v King [2020] HCA 4; (2020) 376 ALR 1, the High Court had occasion to consider the issue of whether a director (Mr King) of the parent company of a responsible entity (MFSIM) was an officer of the responsible entity within section 601FD(1) of the Corporations Act, notwithstanding that any capacity Mr King had to affect the responsible entity did not derive from his occupation of an “office” within the responsible entity subsidiary itself.
The trial judge found as a matter of fact that Mr King had acted as the ‘overall boss of the MFS Group’ and assumed ‘overall responsibility for MFSIM’ and that this was sufficient to establish that Mr King had the capacity to affect significantly the financial standing of MFSIM. The trial judge’s factual finding on this issue was not disturbed by the Court of Appeal of the Supreme Court of Queensland. Importantly, the Court of Appeal concluded that for the appellant (ASIC) to establish that Mr King was an ‘officer’ of MFSIM within para (b)(ii) of the definition in section 9 of that term as it applies to a corporation, it was necessary for ASIC to prove that Mr King had acted in an ‘office’ of MFSIM, in the sense of ‘a recognised position with rights and duties attached to it’.
The High Court held that the Court of Appeal erred in so concluding and allowed ASIC's appeal. Significantly, the High Court unanimously held that para (b)(2) of the definition of ‘officer of a corporation” in section 9 is not limited to those who hold or occupy a named office in a corporation or a recognised position with rights and duties attached to it. According to Kiefel CJ, Gageler and Keane JJ at [46]–[47]:
"If the CEO of the parent company of a group of companies is allowed to act in relation to other companies in the group untrammelled by the duties that attach to officers of each of the other companies in the group, shareholders and creditors would be left exposed to an obvious risk. 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, when regard is had to Ch 5C of the Act, and specifically s 601FD, which was enacted to provide protection to members of managed investment schemes by imposing duties and responsibilities on the officers of responsible entities."
"It is impossible to discern from the Act the intention that an officer of a holding company should fall outside para (b)(ii) of the definition in relation to a subsidiary if, as a matter of fact, that individual has the capacity to affect significantly the financial standing of the subsidiary, particularly where that individual has demonstrated that capacity by exercising it to the detriment of the subsidiary and its creditors and shareholders. As the decision of Santow J in Adler [(2002) 169 FLR 253 at 279–80] il-lustrates, that the capacity arises, at least in part, by reason of a formal position in the holding company of the corporate group may well establish that the capacity exists and explain how that has come about. It is certainly not a reason to deny that the capacity exists."
Nettle and Gordon JJ stated in ASIC v King at [91]-93] that:
"[D]etermination of whether a person falls under para (b)(ii) of the definition of “‘officer’ of a corporation” requires consideration of the role the person played in the management of the corporation. The inquiry is not limited to any particular issue or act which the person was involved in, and which is said to constitute a breach of duty.[106] The text of para (b)(ii) is directed to those who have the capacity to affect significantly a corporation's financial standing: not just any capacity will suffice.[107] Determining whether a person has such a capacity depends on identifying their role in relation to the corporation, what they did or did not do (whether on a particular occasion or over time) and the relationship between their actions or inaction and the financial standing of the corporation.
The quality of a person’s capacity or actions, and the effects of that capacity or those actions on the management of a corporation, are not necessarily uniform across corporations or corporate groups, or even uniform within a single corporation or group. The size of a corporation, the corporate structure, the management structure, and the identity and nature of the persons involved are likely to affect who is an officer of a corporation at any point in time. Circumstances may change over time, sometimes dramatically.
In smaller companies, it is possible for all members to participate in the management of the company such that it practically operates much like an incorporated partnership."
Nettle and Gordon JJ then added the following at [185]-[186]:
"Paragraph (b)(ii) of the definition of "officer" in s 9 of the Corporations Act 2001 (Cth) is not limited to those who hold or occupy a named office, or a recognised position with rights and duties attached to it. A conclusion that a person has to hold or occupy a named office, or a recognised position with rights and duties attached to it, would be contrary to the text of the definition, which does not refer to any need to hold a named office. Such a construction would also be contrary to the extension of the definition of "officer" over time to those who are concerned in, or who take part in, the "management" of the corporation as that expression was explained by Ormiston J in Bracht."
"An officer of a corporation includes a person who has engaged in certain conduct (para (b)(i)), who has a certain kind of capacity (para (b)(ii)), or who has (or had) a certain influence on the directors of the corporation (para (b)(iii)). The question was not whether Mr King held a named office in MFSIM. Taken together, the facts and circumstances described compelled the conclusion that Mr King was a person who had the capacity to significantly affect the financial standing of MFSIM."
Subsequent to the decision in Australian Securities and Investment Commission v King , further applications of the section 9 definition of officer have been before the Courts. In Australian Securities and Investments Commission v GetSwift Limited (Liability Hearing) [2021] FCA 1384, the context was whether an entity had, or ought reasonably to have, come into possession of information that an officer actually had or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer: see [2021] FCA 1384 at [1077]-[1082]. It is noteworthy that in that case, a consideration was given to the application of section 1041H of the Corporations Act which refers to "a person" who engages in conduct. The relevant issue in relation to this latter section concerned the circumstances in which an individual will personally contravene s 1041H by conduct engaged in during the course of the corporation’s affairs: see [2119]-[2122].
See also, Australian Stainless Distributors Pty Ltd v Stacey [2021] QSC 278 and Stuart v Mordialloc Sporting Club Inc; John Barr Investments Pty Ltd v Mordialloc Sporting Club Inc [2021] VSC 244 at [97].
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