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Reliance on professionals
A director may not shirk his responsibility
by leaving everything to others. He must take proper steps
to see that there is an apparently proper management system
in place which is apparently working and providing the directors
with what appears to be proper information. He cannot (nor
is he required) to do more than that.
Thus, for example, in Re: Douglas
Construction (1988) BCLC 397 the non-finance directors conduct
was held not to be unfit when he appointed an apparently competent
finance director (an accountant) who produced management accounts
which appeared to be satisfactory and assured the non-finance
director that things were going well, despite the fact that
the company was trading in an increasingly precarious position
and (unknown to the non-finance director) had received a welter
of writs and summonses for unpaid debts from creditors and
had mounting Crown debts.
When assessing the question whether
the non-finance director is unfit on the grounds that there
was no reasonable prospect that the company would avoid insolvent
liquidation, much will depend upon:
- the quality of information
provided to the non-finance director by the finance director/advisor
and others (bookkeepers, financial managers etc); and
- whether the non-finance director
can be criticised (to the extent that his conduct is in
itself unfit) for relying upon that information or not
ensuring a better quality of information.
Thus, suppose the Court should find in
a given case that:
- the other directors reasonably
regarded their finance director or financial adviser as
competent and diligent and someone whom they had no reason
to believe was not performing his job properly; and that
- the finance director or financial
director ought to have concluded at a particular date
that there was no reasonable prospect that the company
would avoid insolvent liquidation but that
- the finance director did not
provide his co-directors with the information to enable
them to appreciate this.
The conduct of his co-directors
will not be culpable (or at least sufficiently culpable) for
disqualification purposes.
In Secretary of State for Trade
and Industry v Tjolle and others (unrep) 2nd May 1997, Jacob
J. absolved the 3rd respondent from any blame because it was
reasonable for her to have relied on the mere presence of
an accountant advising the board:
"So far as Mrs Kenning was concerned,
a responsible chartered accountant had come on the scene.
She knew he had knowledge of the company was trusted advisor
of her boss, Mr Tjolle. I do not see why she should have inquired
further."
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