Reference no: EM132603382

Question - Stationary Pty Ltd is a company that sells high end stationary products. Unfortunately, sales have dropped recently. The company hires Rick Pen, a New York-based consultant, to advise it on how to increase sales. Stationary Pty Ltd also names Rick to its board as a non-executive director. Rick does not make it to Australia very often and although the company arranges a dial-in number so that Rick can participate by teleconference, Rick forgets to call in to most of the company's board meetings, which take place in the middle of the night, New York time.

Rick is not that concerned, though as he says, "I'm only a marketing person. I don't know how to run companies. Anyway, the other directors and outside advisers will tell me whatever I need to know."

In the meantime, Stationary Pty Ltd issues its year-end financial statements. Neither Robert, a non-executive director who is an accountant by trade, nor the outside accountants or auditors realize that the financial statements neglected to disclose that Stationary Pty Ltd had just borrowed $50 million from Bad Bank. The error made Stationary Pty Ltd's financial situation look significantly healthier than it in fact was.

Discuss the potential liability of Stationary Pty Ltd's directors under section 180 of the Corporations Act, including any defences they may have.