On 5 March 2026, the Federal Court delivered a judgment of almost 500 pages in the ASIC v Bekier case that materially changes how director and officer duties are assessed, and the consequences when governance fails.
"A recurring topic ... is whether a director or other officer has exercised the requisite degree of care and diligence, particularly when delegating to and relying upon management."
— Justice Michael Lee
This judgment is a clear signal to boards across Australia, and it means that a review of your Directors & Officers (D&O) insurance is a necessity at your next renewal.
How does this affect Directors?
Directors face personal liability, including personal punitive penalties.
Directors and senior executives commonly have the protection of a deed of access and indemnity, which enables them to seek indemnification from the company. However, this protection is limited. A deed of indemnity cannot cover certain categories of liability, including civil penalties, regulatory fines, or circumstances where indemnification is prohibited by law or the company is unable to indemnify.
Breaches of director and officer duties can result in personal liability, including:
- Personal financial penalties running into hundreds of thousands or millions of dollars
- Disqualification from holding director or officer roles, potentially permanently
- Defence costs that can exceed $1 million before liability is determined
These costs are not corporate expenses. They can expose personal assets and create lasting career impact.
The Governance Standard Has Shifted
The judgment makes it clear that passive oversight is no longer acceptable.
Directors and officers are expected to:
- Ask difficult questions when information does not align
- Require clear, decision ready reporting rather than volume for its own sake
- Act on red flags, even when commercially inconvenient
- Ensure material risks reach the full board and are not filtered through management
In higher risk sectors such as financial services, gaming, mining and energy, the standard is even higher.
ASIC Is Increasing Enforcement Activity
ASIC has publicly confirmed that this judgment supports its enforcement strategy. The regulator is actively targeting entire boards and executive teams for systemic failures, not only isolated misconduct.
When regulatory scrutiny arises, D&O insurance is critical to fund the defence.
Five actions directors should take now
1. Be Clear on Your Actual Duties
Section 180 of the Corporations Act requires directors and officers to act with care and diligence. The standard is assessed by reference to a reasonable person in the same position, considering:
- Company size and complexity
- Industry risk profile
- Your role and functional responsibility
- Information available to you
Expectations vary by role. CEOs are the link between management and the board. General Counsel are expected to identify legal risk others may miss. Non executive directors can rely on management, but only after proper challenge.
2. Fix the Board Pack
The Court was critical of modern board papers, describing them as excessive in volume and ineffective at highlighting risk.
Board materials should:
- Clearly identify material risks
- Synthesise information rather than reproduce raw data
- Provide context and implications for decision making
- Allow sufficient time for meaningful discussion
If critical issues are buried in hundreds of pages, governance has already failed.
"An important initial step ... to guiding and monitoring management is exercising control and preventing electronic document dumps masquerading as board packs."
— Justice Michael Lee
3. Understand How Information Flows
In the Bekier case, critical risk intelligence existed but never reached the board in usable form.
Key questions for directors:
- How does adverse information travel within the organisation?
- Do risk, compliance and legal functions have direct board access?
- How often are management recommendations challenged?
- Do board minutes evidence proper challenge and consideration?
Weak escalation pathways create personal exposure.
4. Do Not Rely Blindly on the Business Judgment Rule
The Business Judgment Rule is a legal protection that can shield directors and officers from personal liability when they make a business decision that later turns out badly, provided certain conditions are met. Courts will not second‑guess business decisions with the benefit of hindsight if the decision‑making process was sound.
However, the business judgment rule offers protection only where an active decision is made in good faith.
It does not protect:
- Inaction
- Failure to inquire
- Ignoring known risks
In ASIC v Bekier, inaction meant the rule did not apply.
5. Review D&O Insurance in Detail
Many directors do not fully understand their D&O coverage until it is tested.
Key considerations include:
- Defence costs: Investigations can run for years and cost millions. Policies must advance costs in real time.
- Conduct exclusions: Findings of dishonesty can trigger clawback of defence costs. The timing of exclusions matters.
- Insurability of penalties: Many Australian regulatory penalties are uninsurable. Directors should understand where exposure remains.
- Side A coverage: This protects individuals when the company cannot or will not indemnify them. Adequate Side A limits are essential for senior executives.
Consequences for Directors
The ASIC v Bekier decision confirms that directorship and senior executive roles carry genuine personal risk.
Potential consequences include:
- Multi million dollar defence costs
- Significant personal penalties
- Disqualification from office
- Long term reputational harm
D&O insurance is designed to allow directors to govern properly, challenge management, and manage these risks.
What to do next
Directors should:
- Understand policy limits and adequacy
- Confirm how defence costs are advanced
- Review conduct exclusions and clawback provisions
- Assess Side A adequacy, particularly for senior roles
Boards should also use this judgment as a governance health check. Are risks clearly escalated? Are board papers decision ready? Is management properly challenged?
The regulatory landscape is more aggressive. Shareholders are more litigious. Governance expectations have increased.
With appropriate governance discipline and properly structured D&O insurance, these risks are manageable. The critical step is addressing them before the investigation begins, not after.
Speak to your Edgewise broker to discuss your D&O policy.
The information on this page is intended for general educational purposes and necessarily simplifies some concepts for clarity. Insurance policies can differ widely between insurers, policy types, and jurisdictions. For guidance on your specific circumstances, you should review your policy documents carefully and consult a qualified insurance adviser, broker, or legal professional.