In our increasingly multicultural society, and in an era of globalisation, it's becoming more commonplace for persons of non-English speaking backgrounds to become company directors heading up engineering, construction and property industry companies.
If you do become a company director, you are by law subject to a set of duties in the way you act towards the company. You are to act in the company’s best interests, not to allow it to trade while insolvent, to act with due skill and care, to be informed about the company, to act in good faith toward the company, to not misuse your position or information about the company, and the duty to keep proper books and records. It’s an onerous list indeed.
But what happens when a company director, as part of his or her duties, has to read documents, sometimes technical, which are written in a language which is unfamiliar to the director?
This occurred with a recent case where a director who is Chinese was involved in signing and authorising prospectus documentation when he was shown to have not read and or understood such documentation. The case is Australian Securities and Investments Commission v Sino Australia Oil and Gas Limited (in liquidation) (2016).
The director in question unfortunately did not understand English and didn’t obtain a translation of the document he signed off on.
So if you are a company director and do not read read or understand English well (or at all), and yet you accept documentation that you do not fully understand as being true and correct, this case spells danger for you.
The court said that, for example, if as a company director you read financial documentation which is common, or indeed should be common as a necessary part of your duty to be informed as to the company’s affairs, it is not just a matter of looking for ‘typos’ and or arithmetical errors. You have to actually understand and read such documentation and ensure the document is accurate in a broad sense. You should not just blindly accept the truth of its contents.
Overall, therefore, company directors in Australia – whether English speaking or non-English speaking – are subject to the same duties as ‘Australian’ directors. They should not merely sign documentation without turning their minds in a significant way to the contents of the document they are asked to sign.
Importantly, you must resist the temptation to blindly (which is in a sense understandable) rely on what you are told by other directors and or other persons within or outside the organisation as to the subject matter at hand. To do so and ‘get it wrong’ as this director did, will not excuse you from the legal consequences as a result.
Those consequences could be the worst case scenario result, facing a period of being banned from acting as a director. Other consequences could be fines, repayment of any monies gained among other things.
But as said, losing your ticket to be a director could have disastrous results for not only you (losing your livelihood) but also for the company itself, and of course its reputation. By way of example, a one-person building company could lose its only building practitioner director, effectively putting it out of business altogether in some cases.
There is light at the end of tunnel, as each case does on its own facts. Just because you are in a similar situation as the director in this case doesn’t necessarily mean the court will make the same factual findings and the same result will ensue. It depends on all of the particular circumstances.
But the central lesson of the case is that as a director of a company you have certain duties to that company which you cannot legally pass on to someone else to comply with. If you are in doubt as to what you may be required to do to comply with the law in this sometimes confusing area, you should seek professional advice.