A company director governs a company on behalf of its shareholders (or members). Directors have responsibilities to ensure compliance with general and specific laws, exercise their powers, and discharge their duties with the degree of care and diligence expected of a reasonable person in the same circumstances.
All directors in a company are legally required to adhere to directors’ duties and obligations. Failure to do so, or a breach of these duties, can result in serious consequences, which will be discussed in this article. Outsourcing your corporate responsibilities to a company secretary provider can help you meet your obligations in a timely and effective manner, thereby reducing your risk of breaching the Corporations Act, facing fines, or attracting regulatory investigation.
Who Can be a Director in Australia?
The Corporations Act 2001 outlines specific eligibility criteria for directorship in Australia to ensure strong and accountable corporate governance. Understanding these criteria is an important first step for anyone looking to take on director responsibilities within Australia’s regulatory framework, particularly when considering new appointments and maintaining compliance.
Section 201B of the Corporations Act 2001 (the Act) provides that a director must:
- be an individual;
- be at least 18 years of age and consent in writing to the appointment; and
- not be disqualified from managing corporations under Part 2D.6 of the Act unless appointed with ASIC’s permission (section 206F) or with leave granted by a court (section 206G).
Proprietary companies must have at least one director who ordinarily resides in Australia. (For more information on proprietary limited companies, please refer to A Proprietary Limited Company in Australia). Public companies require a minimum of three directors, with at least two ordinarily residing in Australia.
Meeting these eligibility requirements is a key step towards carrying out your legal and governance responsibilities as a director in Australia.
Duties of Directors
Directors play a pivotal role in shaping and guiding a company’s direction. As such, their duties are not merely administrative — they are legal obligations with substantial implications.
In Australia, directors’ responsibilities are governed by:
- the common law (i.e., case law);
- statute, primarily the Corporations Act 2001 (Cth); and
- the company’s internal governance documents, such as its Constitution and, where applicable, any Shareholders Agreement.
These duties serve to protect both the company and its stakeholders by ensuring that directors act with integrity, care, and in the company’s best interests.
Key Duties and Responsibilities of Directors in Australia
Directors are expected to carry out a broad range of functions that fall within the scope of director responsibilities in Australia. The key duties include:
- Acting in good faith and in the best interests of the company – A director must act in good faith, in the best interests of the company, and for a proper purpose (section 181). This includes avoiding conflicts of interest (refer to point 3) and actively managing disputes if they arise.
- Acting with care and diligence – A director is required to exercise the level of care and diligence that a reasonable person would display in the same position (section 180). This involves staying informed and making decisions based on accurate information.
- Avoiding conflicts of interest – Directors must disclose any material personal interest in matters relating to the company (section 191). Full transparency is a core part of a director’s responsibilities in Australia, helping to preserve stakeholder trust.
- Not misusing information or position – Directors must not use their position (section 182) or information obtained through their role (section 183) to gain an unfair advantage for themselves or others, or to the detriment of the company.
- Not trading while insolvent – If a company is unable to pay its debts as they fall due, it is considered insolvent. Directors must ensure the company does not continue trading while insolvent (section 588G). Breaching this duty can result in civil and criminal penalties, including director disqualification.
Understanding and complying with these expectations is essential to fulfilling director responsibilities in Australia effectively.
Consequences of Breach of Directors’ Responsibilities in Australia
Breach of directors’ duties under the Corporations Act or common law may result in serious legal consequences. These vary depending on the severity and nature of the breach but commonly include:
- criminal sanctions and penalties, including imprisonment;
- civil penalties and financial liability; and
- disqualification from acting as a company director.
To mitigate risks, it is prudent to seek professional support early. Appointing a qualified and experienced corporate secretarial service provider can ensure that director responsibilities in Australia are met consistently and correctly.
How Can BoardRoom Help?
At BoardRoom, our outsourced company secretary services are designed to support directors in maintaining robust corporate governance and fulfilling their legal duties. We work closely with boards and management teams to ensure efficient, compliant administration.
Our services include:
- Acting as named Company Secretary for Australian businesses
- Managing and minuting board, committee, and shareholder meetings
- ASIC compliance, including subsidiary management
- ASX compliance and advisory, including continuous disclosure, listing rules, governance principles, and corporate action management
- Officeholder appointments and resignations, share transfers, company incorporations, and deregistrations in Australia
- Updating and maintaining minute books and statutory registers
- Providing corporate governance advice and documentation support, including charters, policies, and the corporate governance statement
By outsourcing to BoardRoom, directors can focus on strategic initiatives while we help ensure their responsibilities in Australia are fulfilled in line with regulatory requirements. Contact Us Today.
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