10 August 2010

 

Minter Ellison Rudd Watts chairwoman Cathy Quinn was recently in the media, following the judgment in favour of Feltex's five former directors, commenting that a board can, and should be able to, rely on the expert advice of legal teams and accounting firms.

 

Quinn, a corporate and commercial lawyer highly-regarded for her specialist legal work in mergers, acquisitions, securities law, and corporate governance, observed the "massive pressure" on professional advisers to ensure the information they give clients is accurate, noting that this existed even before the Feltex decision.

 

"There is massive pressure on professional advisers. Clients expect us to perform to the highest standards. In this case they [directors and Ernst & Young] were learning the ropes [under new reporting standards]. Unfortunately, the case was brought on a very technical area."

 

The directors were charged for alleged breaches of the Financial Reporting Act (FRA) for not disclosing certain information under International Financial Reporting Standards (IFRS).

 

In the New Zealand Herald article, Quinn said the complexity of listed companies and disclosure requirements made it impossible for directors to do everything, adding that the notion directors should do everything themselves and oversee every part of a company is "completely ridiculous".

 

"The board employs and monitors the chief executive and endeavours to manage the company correctly. If the company performs well, it is to the benefit of the shareholders.

 

"Directors are entitled to seek and rely on professional advice. This was the fundamental defence under the Companies Act."

 

We invite you to read our related Corporate Governance News Alert or to contact Cathy Quinn for more information.