Director Reliance on Management: Lessons from ASIC v Bekier on Discharging Duties

In our recent update, Engagement, Oversight and Accountability for Directors in High-Risk Businesses, we examined the decision in Australian Securities and Investments Commission v Bekier [2026] FCA 196, where the Court found that ASIC failed to establish that the non-executive directors breached their duty of care and diligence under s 180(1) of the Corporations Act 2000 (Cth) (the Act).

Beyond these findings, a key aspect of the case is the Court’s examination of the extent to which executive directors and officers can rely on others. In this follow up article, we will discuss how the court approaches director’s reliance on management and the role of general counsel who also serve as company officers.

Reliance on Management

The judgment looks at how far both executive and non-executive directors can reasonably rely on management. ASIC ultimately failed in its case against non-executive directors largely because it could not establish that the pleaded risks were sufficiently foreseeable at the relevant time or that reasonable directors would have taken the precise steps ASIC claimed were required. However, the extent to which executive and non-executive directors can reasonably rely on management, and the scrutiny in which the court applies to each, differs.

Directors are required to take reasonable steps to place themselves in a position to guide and monitor the management of the company. In this case, in considering whether the reliance on management was sufficient in discharging director duties, the court scrutinised the executive director to an even greater extent.

The court held that the executive director, breached s 180(1) because he was more closely involved in the day-to-day operations and had direct access to critical risk information that should have prompted action. Executive directors are expected to actively interrogate information, identify red flags, and ensure that serious risks are escalated to the Board. In this case, the executive director failed to adequately respond to clear warning signs, did not ensure the Board was properly informed, and did not take reasonable steps to address escalating compliance and reputational risks.

This reflects the higher standard imposed on executive directors relying on management to effectively discharge their duties, whose operational role and exposure to information require a more proactive and vigilant approach to discharging their duties.

How should a director appropriately rely on management to discharge their duties? 

Whether a director has properly discharged their duties turns on whether they have acted honestly, in good faith, and in the best interests of the company, exercising their powers to the best of their ability. This assessment becomes more complex where directors place reliance on management, as such reliance must be active, informed and reasonable, not passive. To rely on management effectively as a director, you should:

• apply an enquiring and critical mind, considering the company’s overall position and testing information put before you, rather than accepting it at face value, and proactively seek further information where required;
• ensure that appropriate internal controls, risk management frameworks, and reporting systems are established and operating effectively;
• identify and respond to any “warning signals” or inconsistencies by taking reasonable steps to verify the accuracy of information provided by management;
• ensure that delegations of authority are clearly defined, formally approved, and properly documented to maintain accountability; and
• independently assess whether reliance on management in the circumstances is exercised in good faith and in the best interests of the company.

Role of General Counsel

In this case, court found that Star’s General Counsel failed to exercise their powers and discharge their duties as an officer of Star with the degree of care and diligence required, contravening s 180 of the Act.

The court held that a General Counsel is not just a passive legal advisor, but a key officer of the corporation who owes independent duties under s 180(1) of the Act. Where the General Counsel also holds positions such as Company Secretary or Chief Legal and Risk Officer, their responsibilities extend beyond managing a legal team. They are central to identifying legal risk, ensuring compliance, and ensuring informed decision-making at the highest levels of the organisation.

If you are in the position of General Counsel within your company, this case provides some key lessons, including:

• your duties under s 180(1) are owed to the company itself, not to the CEO or other members of management;
• where information has been communicated within management, you cannot rely on others appropriately escalate the information;
• if you have been made aware of matters giving rise to legal, regulatory, or reputational risk, and know (or ought reasonably to know) that the Board is not fully informed, you must take steps to ensure that the Board is properly advised;
• your duties are not discharged by deferring to internal reporting lines or relying on others to communicate critical information;
• the standard of care expected in discharging your duties is dependent on your legal training, experience, and expertise. A legally qualified officer is expected to identify and determine risks that others may not, particularly with regulatory environments such as AML/CTF compliance; and
• this includes recognising when information is incomplete, misleading, or creates a foreseeable risk of legal breach, and taking proactive steps to address those issues.

Ultimately, over-reliance on hierarchical reporting structures will not suffice where the officer is aware of significant legal risk. The court found in this case that the General Counsel failed to exercise her powers and discharge their duties as an officer of Star with the degree of care and diligence required and thereby contravened s 180(1) of the Act.

Key Takeaways