Efficient and effective communication has become an increasingly difficult task at the board level, where companies and their directors are expected to manage complex and voluminous quantities of information.
Recent Australian cases, such as Centro1, have demonstrated the need for directors to have continual access to company information and be able to analyse the information presented to them. In Centro, the Court provided little comfort to the company’s directors, who relied on the quantity and complexity of the information supplied to them as a defence to allegations of negligence, reasoning that the board could control the amount and format of information received. Consequently, the standard of information oversight now expected can create problems for companies and their directors, and highlights the growing importance placed on managing the manner in which information is provided to directors, not only in terms of content but also in terms of presentation and accessibility.
Cloud-based information technology services will potentially revolutionise the manner in which management communicate with directors and directors communicate with each other. Depending on the services provided, there are many advantages associated with using the more popular devices, such as iPads, to distribute board papers to directors. For example, there are cost savings and efficiencies associated with reduced paper consumption, courier fees and time spent on document preparation. Directors have immediate access to current documents, regardless of their location. Further, with documents being stored in a central document repository (ie, the cloud), there is a corresponding reduction of physical storage space.
These services can vary substantially from a customised service developed to meet the needs of a particular company, to an ‘off-the-shelf’ service where a company has no control over the hardware or software that provides the service. Accordingly, given these technologies are relatively new and continuously evolving, it is important for companies to remain vigilant, to:
- ensure that any chosen cloud service is compatible with their corporate governance and operational policies; and
- take all appropriate actions to minimise risks associated with a variety of new legal and regulatory challenges arising from the use of cloud services.
Some of the more apparent legal and regulatory issues are discussed in detail below.
1ASIC v Healey & Ors  FCA 717.