Quick Reference Guide to Director’s Duties

 

Directors must comply with many duties and obligations when exercising their powers to control and manage a company.

There are significant penalties for Directors who fail to exercise these duties and obligations.

The team at RNG Lawyers can assist you in minimising the risk of non-compliance and provide you with advice if you suspect a Director has failed to comply with their duties and obligations.

The key Directors’ duties are summarised below:

Director’s Duties Pursuant to the Corporations Act 2001 (Cth)

1. Directors must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director and had the same responsibilities;
    
2. Directors must make business judgments:
    
   • in good faith and for a proper purpose;
      
   • without a material personal interest in the subject matter of the judgment;
      
   • inform themselves about the subject matter of the judgment to the extent that a reasonable person would believe to be appropriate;
      
   • reasonably believe that the judgment is in the best interests of the company.
      
3. Directors must act in good faith in the best interest of the company and for proper purpose;
    
4. Directors must not improperly use their position or information available to them to gain an advantage for themselves or someone else or cause detriment to the company;
    
5. Directors must not act recklessly and dishonestly;
    
6. Directors must exercise their powers and discharge their duties in good faith in the best interest of the company for a proper purpose;
    
7. Directors are responsible for any power delegated to another;
    
8. Directors must disclose all material personal interests;
    
9. Directors must keep proper books and records that explain transactions and the financial position of the company;
    
10. Directors must avoid insolvent trading.
     

Director’s Duties Pursuant to Common Law and Equity

11. Directors have a duty to act in good faith in the interest of the company as a whole;
     
12. Directors have a duty to not act for an improper purpose;
     
13. Directors have a duty of care and diligence;
     
14. Directors have a duty to retain discretion;
     
15. Directors have a duty to avoid conflicts of interest;
     
16. Directors have a duty to not disclose confidential information;
     
17. Directors have a duty to not abuse corporate opportunities.
     

Director’s Duties to Third Parties

18. Directors must ensure all relevant information is notified to the Australian Securities and Investments Commission;
     
19. Directors have duties in relation to reporting, maintaining company registers and holding company meetings pursuant to the Corporations Act 2001 (Cth);
     
20. Directors of trustee companies must also ensure that the company is indemnified from the assets of the trust for any loss incurred while acting as a trustee.
     

Directors have further duties in relation to trade practices, tax, insurance, work health and safety, industrial relationships, environment, finance, intellectual property, criminal activity and trading.
 

If you would like further advice on directors duties, or any aspect of business law please contact our Commercial Law Team or call us; (03) 9739 7377

 

Written by RNG Lawyers Commercial Team

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