The recent „Feltex Five‟ decision, Ministry of Economic Development v Feeney and Ors, demonstrated that directors may avoid being held personally liable in certain circumstances if they have relied on expert advice. The decision involved the prosecution of five Feltex directors („Directors‟) for failing to disclose breaches of an ANZ loan agreement and for classifying this ANZ liability as a current liability in their financial reports. While the Directors did not deny that their reports breached the Financial Reporting Act 1993 („FRA‟), they argued that they had a defence under s40 FRA, in that they took all reasonable steps to ensure that the requirements under the FRA had been met. The Directors argued that they relied on expert advice which led them to believe that their reports were compliant. At the time the financial reports were prepared, the company was transitioning to new financial reporting standards and commissioned a team of accountants to review these standards and the company‟s financial reports. However, it was reported that the accountants incorrectly advised the company of the requirements under the new standards and their advice led to the breach and subsequently the prosecution of the Directors. The issue was whether the Directors could rely on this expert advice or whether they should have taken further steps to meet the requirements under s40 FRA. The Court held it was necessary to determine whether the Directors had taken all reasonable steps in light of the protections under the Companies Act 1993 (the „Act‟). Under s138 of the Act, directors are able to rely on information and advice from a professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person‟s professional or expert competence. This defence applies where it is evident that directors:  acted in good faith,  made proper inquiries where the need for inquiry is indicated by the circumstances, and  had no knowledge that such reliance is unwarranted. In this case it was found that a reasonable director, having read the accountants‟ report and having attended their meeting, would have been left with no doubt that the financial statements complied with the new standards. Therefore the Directors had no knowledge that reliance was unwarranted and were entitled to believe that the work undertaken by such a highly reputable firm was within their expertise. Furthermore, they were aware that the transition to the new standards was very complex and had put in place a comprehensive strategy to manage it. Therefore it was held that the Directors took all reasonable and proper steps to ensure the requirements of the FRA were complied with and there was no evidence of an intention to mislead. Each of the Directors was found not guilty.