Missing the red flag: Lessons from ASIC v Bekier & Ors for company directors

The Federal Court’s decision in ASIC v Bekier & Ors provides a timely reminder of the standard of care and diligence expected of company directors under section 180(1) of the Corporations Act 2001 (Cth). While the case does not alter the existing legal standard, it reinforces the level of care and diligence expected of executive and non-executive directors, particularly in high-risk industries.

At its core, the judgment reinforces a central theme in modern corporate regulation – directors cannot be passive recipients of information. They must actively engage with, interrogate, and where necessary, challenge the materials put before them.

What happened in ASIC v Bekier & Ors?

The proceedings arose out of the Australian Securities and Investments Commission’s (ASIC) case against the director and CEO, non-executive directors and the Chief Legal and Risk Officer  of The Star Entertainment Group (Star Entertainment). ASIC alleged that the directors breached their duty of care and diligence by approving and facilitating arrangements with junket operators despite the presence of significant ‘red flags’, particularly in relation to anti-money laundering risks.

ASIC’s case focused on the directors’ alleged failure to adequately respond to information suggesting that certain junket operators posed regulatory and reputational risks. These included reports identifying deficiencies in Star Entertainment’s anti-money laundering risk assessment processes, internal communications describing conduct that exposed Star Entertainment to an 'unacceptable level of risk', adverse media reporting and knowledge of police exclusions concerning associates of a junket operator, and warning correspondence indicating the company may have made misleading representations to third parties concerning impermissible use of China Union Pay (CUP) cards by casino customers.

The non-executive directors argued in their defence that the ‘red flags’ were not clearly brought to their attention but instead appeared in an appendix to an internal audit report within a lengthy 235-page board pack. At the same time, management’s presentation conveyed those risks had been assessed and were under control, and the materials supporting the approval of additional credit did not explicitly highlight any heightened risk concerns.

The Court’s decision

The Court found that the CEO and Chief Legal and Risk Officer contravened section 180 of the Corporations Act by breaching their duties to Star Entertainment, while dismissing ASIC's case against the seven non-executive directors entirely.

For the CEO, the Court found he contravened section 180 by:

• failing to inform the board of key matters, including serious money laundering risks in relation to junket organisations
• failing to take adequate steps to find out more information about misleading correspondence sent by Star Entertainment to its bank.

The Court reaffirmed that where an executive knows the information presented to the board is incomplete and understates the severity of a risk, section 180(1) requires them to ensure the board receives a full and accurate picture of the risk.

For non-executive directors, they are generally entitled to rely on management to identify and communicate risks and material matters. However, that reliance is displaced where a director knows, or ought reasonably to know, facts that call the information into question.

The test applied by the Court is whether the information before the directors was sufficient to awaken their suspicion and thereby displace the entitlement to rely on management. When nothing in the information environment raises that suspicion, reliance is permissible. When something does, a duty of further inquiry arises.

The Court also emphasised that directors must bring an 'independent and inquiring mind' to their role. Board positions are not 'tokens or glittering prizes decorating a CV' – they require active engagement and a willingness to interrogate materials and challenge management where appropriate.

Practical lessons for company directors

The decision offers several practical lessons for directors:

• engagement is essential – directors must actively engage with board materials, maintain familiarity with the company’s operations and financial position, and attend meetings regularly. A passive approach is unlikely to satisfy the statutory standard
• context matters – the standard of care is shaped by the company’s circumstances, including the nature of its business, its risk profile, and the role of the individual director. Expectations will be higher in regulated or high-risk industries, and for executive directors
• understand the limits of reliance – reliance on management is permissible, but only where there is no reason to doubt the information provided. Directors must remain alert to information that warrant further inquiry
• act on red flags – once information suggesting legal, regulatory or commercial risks arises, directors must respond with timely and appropriate inquiry. Inaction is not defensible
• information governance is critical – boards must ensure they receive clear, accurate and digestible information. Overly complex or voluminous materials can themselves create governance risk
• document everything – board minutes and records should reflect genuine consideration of issues, including questions asked and challenges made. Proper records are critical in demonstrating compliance with directors’ duties.

ASIC v Bekier & Ors does not mark a shift in the law, but it is a reminder of how the duty of care and diligence operates in practice. It confirms that directors are neither expected to be omniscient nor absolved from responsibility. Rather, they must strike a careful balance: informed, engaged oversight without descending into operational management.

In an environment where statutory regimes increasingly impose personal liability on directors across areas such as anti-money laundering, workplace safety and environmental compliance, the decision send a clear message that directors who maintain an inquiring mindset and ensure robust governance processes will be best placed to meet their obligations and manage personal risk.

If you have any questions about the case or need assistance with understanding your personal liabilities, please contact us here.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Charles Power

Jessica Tilbury

Daniel Fullerton

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