If you’re a director of a public company … there are two key things you must always remember.
One … the company must never trade while it’s insolvent. The debts of a company must be capable of being repaid … if and when they fall due.
If a company board fails to do this … the directors can become personally liable for part of the company debt. Which makes a comfortable board seat a lot less comfortable.
A good example is Kleenmaid, where directors were found guilty of fraud and insolvent trading.
It’s part of what liquidators and the Federal Court are trying to discover about Queensland nickel … where the federal government paid $60 million for employee redundancies. But that investigation’s being thwarted by the disappearance of former director Clive Mensink … the nephew of Clive Palmer.
The other important law directors must remember is to immediately inform shareholders of anything material to the share price. This is more tricky. What’s material? What’s not?
It’s this issue that’s created many shareholder class actions. Right now there’s Bellamy’s, Murray Goulburn, Slater & Gordon and Newcrest all face them.
There’s also rumblings about the ten network – now in receivership – with revelations today the board did not disclose for four weeks the fact that James Packer would not renew his personal guarantee over $200 million of company debt.
And the board of Australia’s largest company – the Commonwealth Bank – seems set to face similar questions over its disclosure about the AUSTRAC investigation into anti-money laundering breaches.
The bank admits it self-reported 51,000 breaches to ASIC in 2015 … but shareholders weren’t informed about it until 10 days ago … when AUSTRAC launched its civil action against the bank.
The bank maintains it informed the market as soon as it knew about the legal action. The question major shareholders are asking is: was that was soon enough and is it material?
Stay tuned. Ii suspect there’s a big story coming there.
Overnight the Dow Jones jumped 135 points. The dollar 78 and a half US cents.