Directors’ Duties & Responsibilities in Australia – Corporations Act

23 Jun 2020

A company director governs a company on behalf of the shareholders (or members) of that company. 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 of a reasonable person in the same circumstances.

All directors in a company are legally required to follow and abide by directors’ duties and obligations. Failure to follow them, or a breach of these duties and responsibilities can have 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, reducing your risk of breaches of the Corporations Act, fines and possible regulatory investigation.

Who Can be a Director in Australia?

Section 201B of the Corporations Act 2001 (Act) states a director must:

be an individual;
be at least 18 years of age and consent to taking on the role in writing prior to appointment; and
not be disqualified from managing corporations under Part 2D.6 unless the appointment is made with ASIC’s permission as provided for under section 206F of the Act or leave is granted by the Court under section 206G of the Act.

Proprietary companies must have at least one director, who must ordinarily reside in Australia. (For more information on proprietary limited companies, please refer to A Proprietary Limited Company in Australia). Public companies have a minimum of three directors, at least two of whom must ordinarily reside in Australia.

Duties of Directors

Directors’ duties in Australia are governed by:

the common law (case law);
statute, primarily the Corporations Act 2001 (Cth); and
the company’s governing rules, being the Constitution, and, where applicable, a Shareholders Agreement.

Key duties of directors in Australia:

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 of the Corporations Act). This includes avoiding conflicts of interest (refer to point 3), and revealing and managing conflicts if they arise.
Acting with care and diligence – a director must act with the degree of care and diligence that a reasonable person might be expected to show in the role (section 180 of the Corporations Act).
Avoiding conflicts of interest – Directors should disclose matters relating to the affairs of the company in which they have a material personal interest (section 191 of the Corporations Act).
Not to improperly use information or their position – These duties require directors to not improperly use their position (section 182 of the Corporations Act) or information they gain during their directorship (section 183 of the Corporations Act) to gain an advantage for themselves or someone else, or to the detriment to the company.
Not to trade whilst insolvent – A company is insolvent if it is not able to pay all of its debts as and when they become due and payable. Directors must ensure the company does not trade if insolvent (s588G of the Corporations Act). A director who breaches this duty may be ordered by a court to pay civil penalties or incur criminal penalties.

Consequences of breach of directors’ responsibilities

There are potentially severe legal consequences if a director breaches their duties under Australian law and the Corporations Acts. These consequences vary depending on the type and severity of the breach. Examples include:

criminal sanctions and penalties, including imprisonment;
civil sanctions and penalties; and
disqualification from being a director.

To prevent and navigate these significant consequences, which result from the misconduct of directors or companies, it is advised to address any concerns at the earliest possible stage by appointing a reputable corporate secretarial service provider.

How Can BoardRoom Help?

Our outsourced company secretary 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 advice 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 assistance including charters, policies, and the corporate governance statement

How Makes Us Your Trusted Company Secretarial Provider?

Priding ourselves as a leading provider of corporate secretarial services in Australia, Boardroom understands that company secretary duties can be expensive, a distraction, and a burden to your management. By outsourcing these responsibilities to our team, you can meet your obligations in a timely, tidy and effective manner, whilst reducing your risk of breaches, fines and any regulatory investigation.

We specialise in providing flexible and cost-effective solutions to a vast range of listed, public, and private companies, international subsidiaries, and associations. We have a large and experienced team with a wealth of corporate secretarial and governance knowledge at our fingertips, complemented and extended into other essential services through our key strategic partnerships with external specialists.

Outsource Your Company Secretary Role

If you have any questions about our corporate secretarial services or need to hire a company secretary in Australia, feel free to contact a member of our team today. Our one-stop solutions and company secretaries are designed to make company formation and registration in Australia simple and trouble-free.