The High Court of Australia has made it clear that even when a person does not hold a formal "office" within a company, that person may still have duties and responsibilities as an "officer" of the company under the Corporations Act 2001 (Cth) ("Corporations Act").
In Australian Securities and Investments Commission v King  HCA 4, King was CEO and an executive director of MFS Ltd, the parent company of the MFS Group of companies ("MFS Group"). MFS Group carried on a financial services business. Its flagship fund was PIF. MFS Investment Management Pty Ltd ("MFSIM") was responsible entity of PIF. MFSIM entered a $200M facility with the Royal Bank of Scotland, which was to be used by MFSIM for the purposes of PIF only.
In 2007, MFSIM and senior personnel in the MFS Group arranged to draw down $150M of the facility to pay down the debt of other MFS Group companies, in a manner that was unquestionably a breach of the Corporations Act.
King had been a director of MFSIM but ceased being a director some 9 months prior to the MFSIM decision to draw down the facility. However King had acted as the overall boss of the MFS Group, assumed overall responsibility for MFSIM, and had substantial influence over MFSIM personnel.
The key question before the High Court was whether King was an "officer" of MFSIM. If he was, he would be found to have breached his duties as an officer of a responsible entity.
"Officer" is relevantly defined under the Corporations Act as follows:
officer of a corporation means:
(b) a person:
(ii) who has the capacity to affect significantly the corporation's financial standing;
The High Court's decision
The High Court unanimously held that an individual does not need to occupy a recognised office to be an "officer". The fact that King had formally ceased being a director of MFSIM did not mean he ceased being an officer. King's overall control and influence over the MFS Group including MFSIM was sufficient to make him an officer of MFSIM. King was banned from managing corporations for 20 years and ordered to pay close to $500,000 in penalties and compensation, in addition to costs.
This case is an important reminder that individuals can have the obligations of a director or officer of a company even if they are not formally appointed to the office. Individuals that make decisions affecting a substantial part of a company's business, or are in a position to significantly affect a company's financial standing, should be aware of their potential obligations under Australian law.