The director relied upon a competent person

To succeed in this defence, a director must show that it was reasonable for them to believe and that they did believe that a competent and reliable person, responsible for providing a director with adequate information concerning the company's solvency, was fulfilling their responsibility.

The director in these cases, still has the responsibility of providing the competent person with all the information that person needs to make an appropriate assessment as to the solvency of the company. If the director gives that person incorrect or inadequate information, the defence fails.

This defence is basically designed to protect directors in large companies where there are bulky accounts and a system in place of competent accountants, credit controls and financial management and the board has a regime whereby those people, provided they are competent and responsible, will report to the board any problems they may not pick up.

An example would be a case involving the management team who are given all the appropriate information and then fraudulently hide the true position from the directors. Ultimately however, the longer the fraud is perpetrated, the more likely the courts are to say;

"Enough is enough. You were the director. It was your job to make sure you were not having the wool pulled over your eyes".