Help! I’m a Director – What duties are expected of me? Part 1

Help! I’m a director. What duties are expected of me?

If you are a recently appointed Director of an Australian Company and you want some clarity around the types of things you can expect to be responsible for, You have come to the right place!

Streeterlaw understands that sometimes the legal jargon of Australian legislation can be quite overwhelming. With that said, the Corporations Act 2001 (Cth) is the key body of legislation that Directors will have to consult in order to gain an understanding of their rights and duties. In addition to the Act, Directors should also consult the Constitution of the Company.

In this article, we focus on breaking down the Corporations Act 2001 (Cth), however if you are a Director experiencing some ambiguities in the interpretation of your Company’s governing
documents, Streeterlaw welcomes you to get in touch with one of our Commercial Lawyers today.

Top 8 Duties in the Corporations Act 2001 (Cth)

In circumstances where your Company does not have a Constitution (yes, this can often be the case!), the Corporations Act 2001 (Cth) will be the primary source of duties that Directors consult. As such, Streeterlaw encourages Directors to, at the very least, know their key duties.
The top 8 that we have identified for you, are as follows:

1. Duty of care and diligence (s 180)

• Always act in the best interests of the Company.

2. Duty to act in good faith (civil obligations) (s 181)

• Directors must act in good faith and for a proper purpose in all matters concerning the Company.

Duty not to improperly use their position (s 182)

• Do not use your position as a Director to gain an advantage for yourself or someone else or cause detriment to the Company.

4. Duty not to improperly use information (civil obligations) (s 183)

• Do not use information you have acquired in the course of being a Director to gain an advantage for yourself or someone else or cause detriment to the Company.

5. Duty to act in good faith and not to improperly use their position or information (criminal
offences) (s 184)

• It is an offence to act recklessly or dishonestly in relation to the Company. It is also an offence to fail to exercise your powers in good faith or for a proper person.

6. Duty to avoid a conflict of interest and to disclosure material personal interests (s 191)

Directors must disclose a material personal interest where a conflict arises in relation to the affairs of the Company.

7. Duty to keep proper accounts and records (s 286)

• Directors must keep financial records including correctly recording and explaining the Company’s transactions, financial position and performance.

8. Duty not to engage in insolvent trading (s 588G)

• Directors have a duty to prevent the Company from trading insolvent. (consult the table under this section of the Act for further particulars).

Worried you might breach a duty? Read Part II 2 of this series for our helpful tips to safeguard yourself as a Director. If you are facing a legal issue as a Director of a Company, or you have some concerns about the operation of the above duties means, Contact Streeterlaw today (02) 8197 0105 to speak with one of our specialist Commercial Lawyers.

Written by Jamal Bakalian

After studying a double degree in Law and International & Global Studies at Sydney University, Jamal completed her GDLP at the College of Law. She is currently undertaking her Masters of Law (majoring in Commercial Litigation). Jamal has been practicing Law for 5 years. With a passion for resolving disputes, Jamal is a valuable member of the Commercial Litigation team at Streeterlaw.

Call us on 02 8197 0105 to book an appointment with Jamal Bakalian!