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Company director's duties 

Director's Duties

The Directors of a company essentially control how the company operates in all aspects, from the entry to the executive personnel. The role of a director varies slightly with each company as different types of business dealings have a different set of requirements. These requirements would generally be set out in a company’s constitution, outlining specific needs from their directors.

Directors Duties under the Corporations Act 2001 (Cth)

The responsibility of being appointed as a Director of a company also has a range of duties and obligations prescribed by the Corporations Act.

Firstly, there are four main duties:

  1. Care and diligence – Require a director to act with a reasonable degree of care and diligence expected in that role (s 180).(ASIC v Adler (2002) ACSR 80)

  2. Good faith – Require a director to act in good faith and best interests of the company (s 181) (Hodgson v Amcor Ltd [2012] VSC 94).

  3. Not to improperly use information – Prohibits a director from improperly using information gained in the course of their director’s duties, to benefit themselves or someone else, to the detriment of the company (s 182) (Hodgson v Amcor Ltd [2012] VSC 94).

  4. Not to improperly use position – Prohibits a director from improperly using their position, to benefit themselves or someone else, to the detriment of the company (s 183) (Permanent Building Society v Wheeler (1994)).

Secondly, there are other major duties covered by the Act:

  1. Insolvent trading – Require a director to ensure that the company is solvent while trading and can pay its debts when due and payable (s 588G) (Hall v Poolman (2007) 65 ACSR 123).

  2. Financial record-keeping and reporting obligations – Require a director to ensure that the company’s financial records and reporting obligations are all met (s 344) (Vines v ASIC (2005) 65 NSWLR 281).

  3. Disclosure of director’s conflicting interests – Require a director to ensure that they disclose any possible conflicting interests they hold (s 191, 208, 205G) (Permanent Building Society v Wheeler (1994)).

  4. Lodging obligations with ASIC – lodging mandatory information to ASIC (s 188).

  5. Continuous disclosure – Applies to listed companies regarding market information (s 674).

Consequences of breaching Directors Duties

Consequences result from breaches often published on the ASIC, the cases decided at the relevant court.  its consequences should depend on the nature of the breach and its severity.

  • Criminal sanctions – criminal sanctions such as imprisonment for up to 10 years or fines depending on the severity of the breach (s 184) (ASIC v Lindberg [2012] VSC 332).

  • Civil sanctions – significant fines may be ordered for breaches and failing to comply with duties.

  • Disqualification – ASIC and the court have powers to disqualify directors from acting or partaking in commercial ventures or acting in executive roles for long periods of time (Part 2.6D) (ASIC v Edwards (No.3) [2007] VSC 1).

  • Commercial consequences – Damage to a business’ reputation may cripple their commercial viability in future ventures.

  • Personal liability – for serious breaches of duties, directors may be indemnified and personally be penalized for the losses caused (ASIC v Vocation Limited [2019] FCA 807).


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