So, you’ve become a director: understanding your duties and responsibilities

Congratulations! This can be a very fulfilling role.

You have likely been advised that operating through a company is advantageous as it can limit personal liability in the event of failure.

But do you understand your duties and responsibilities as a director?

From overseeing the company's affairs to ensure its ongoing success, to complying with your legal obligations under the Corporations Act 2001, there is a lot to stay on top of.

You need to be fully informed about your company's activities, including its financial position, regularly communicate with key personnel about business matters and actively participate in directors' meetings.

You must not use your position, or information gained from it, to harm the company or to gain an advantage for yourself or others.

When making business decisions as a director, you must:

• Act in good faith and for a proper purpose

• Ensure you have no material personal interest in the decision and that it is in the best interests of the company

• Assess how any decision will impact the company's business performance, especially if it involves significant financial expenditure or could affect the company's reputation

• Stay informed about the company's financial position and performance, ensuring it can pay its debts on time

• Seek trusted professional advice when needed to make informed decisions, and

• Fully disclose any material personal interests you have.

These duties and responsibilities are the minimum obligations for directors and officers of small proprietary companies.

And what are the consequences of not doing this?

Directors who fail to comply with their obligations under Australian law may face civil penalties, compensation proceedings, and criminal charges.

Seems like a minefield?

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