International Monetary Fund (IMF) chief Christine Lagarde has been found guilty of negligence for failing to challenge a 400 million euro ($575 million) state arbitration payout to a business tycoon in 2008 when she was French finance minister.

Key points: Christine Lagarde convicted of negligence but spared sentence

Christine Lagarde convicted of negligence but spared sentence Judge says she was occupied by the Global Financial Crisis

Judge says she was occupied by the Global Financial Crisis Ms Lagarde had denied the negligence charges

Despite the ruling, the judges imposed no punishment, citing her preoccupation at the time with the global financial crisis.

She had denied the negligence charges.

"The context of the global financial crisis in which Madame Lagarde found herself in should be taken into account," said Martine Ract Madoux, the main judge, in explaining the absence of any sentence.

She also cited Ms Lagarde's good reputation and international standing as reasons why the court did not hand down a punishment in a case that could have carried a sentence of up to a year in prison.

In their ruling, the judges did not see negligence in Ms Lagarde's decision to seek the settlement with businessman Bernard Tapie, but they said her failure to contest the award to him was negligent, and led to a misuse of public funds.

Her lawyer said immediately after the ruling that his team would look into appealing the decision.

IMF board to meet after ruling

The ruling risked triggering a new leadership crisis at the IMF, after Ms Lagarde's predecessor Dominique Strauss Khan resigned in 2011 over a sex assault scandal.

The International Monetary's Executive Board met after the verdict to consider Ms Lagarde's position following the judgment and reaffirmed her continued leadership of the organisation.

"The Executive Board took all relevant factors into account in its discussions, including the managing director's outstanding leadership of the fund and the wide respect and trust for her leadership globally," the board members said in a statement.

"In this context, the Executive Board reaffirms its full confidence in the managing director's ability to continue to effectively carry out her duties."

As finance minister in the government of then president Nicolas Sarkozy, Ms Lagarde approved the payout to end a long-running dispute between the magnate and the French state.

The case dates back to a time when Mr Tapie sued the state for compensation after selling his stake in sports company Adidas to then state-owned Credit Lyonnais in 1993.

He accused the bank of defrauding him after it resold its stake for a much higher price.

With the case stuck in the courts, the two sides agreed to a private settlement and Mr Tapie was awarded the payout, including interest.

Reuters/ABC