Do you know your duties as a company director?
Knowing and fulfilling your duties as a company director is essential when running a business. The Corporations Act 2001 stipulates general duties that company directors and officers are bound by.
Some of these duties include:
- Keeping yourself properly informed about the financial position of the company and ensuring that the company does not trade whilst insolvent. “An understanding of the financial position of your company only at the time you sign off on the yearly financial statements is insufficient. You need to be constantly aware of your company’s financial position.” Reference: ASIC, What are my Duties as a Company Director?
- Acting in good faith and within the best interest of the business and for proper purpose
- Not to use your position as a director improperly to gain advantage (for you or another person), or to cause any disadvantage to the company
- Not to use your position as a director improperly by taking information to gain an advantage (for yourself or another person), to cause any disadvantage to the company
For more information on director general duties, visit the Australian Securities & Investments Commission (ASIC) website, ‘Directors – What are my duties as a director?’
ASIC provide an informative regulatory guide detailing the duties that directors need to ensure to prevent insolvent trading. The regulatory guide sets out the responsibilities that directors need to take in order to prevent insolvent trading, remain informed on the company financial situation, obligations when dealing with financial difficulties and obtaining proper financial advice. If you require further information or are unsure of your duties as a director, visit the ASIC website for the Regulatory Guide 217: Duty to prevent insolvent trading: Guide for directors.
In addition to complying with general duties as a director, duties extend to shareholders of the company, and if a company becomes insolvent, the director duties extend to include creditors, employees and outstanding entitlements.