Director duties advice
Know your duties as a director before a breach forces you to learn them.
Being a director of an Australian company is a position of significant personal responsibility. The duties imposed by the Corporations Act 2001 (Cth) are personal, non-delegable, and carry serious consequences for breach, including civil penalties and criminal liability. Understanding what the law requires before you act is not optional. It is the foundation of effective directorship.
Some common questions we see about director duties
What are the key duties of a company director in Australia?
Directors of Australian companies owe a range of duties under the Corporations Act 2001 (Cth) (the Act), including the duty to act in good faith in the best interests of the company, the duty to exercise care and diligence, the duty to act for a proper purpose, the duty to avoid conflicts of interest, and the prohibition on improperly using their position or information. The Act also imposes obligations around insolvent trading, a director may be personally liable for debts incurred by a company while insolvent if they fail to prevent those debts.
What is the duty of care and diligence?
The duty of care and diligence under the Corporations Act 2001 (Cth) requires a director to exercise the degree of care and diligence that a reasonable person in a like position in a corporation in like circumstances would exercise. Practically, this means attending and engaging at board meetings, making informed decisions after reading board papers, asking questions when something is unclear, and taking independent advice when the matter warrants it.
What is the business judgment rule?
The business judgment rule under the Corporations Act 2001 (Cth) provides a safe harbour for directors who make business decisions in good faith, for a proper purpose, without a material personal interest, after informing themselves to the extent they reasonably believe appropriate, and rationally believing the decision is in the best interests of the company. The rule protects good-faith commercial judgment from hindsight scrutiny but does not protect decisions made without adequate inquiry or with a conflict of interest.
What is the safe harbour defence for insolvent trading?
The safe harbour defence under the Corporations Act 2001 (Cth) allows a director to avoid personal liability for insolvent trading if, at the time the debt was incurred, they had a reasonable belief that a course of action was reasonably likely to lead to a better outcome for the company than immediate administration or liquidation. The defence requires early, documented action. Any director concerned about a company’s financial position should seek legal advice promptly.
Personal protection
Practical guidance
Pre-emptive risk management
Get clear on your director duties before the situation demands it.
Director liability is personal. Understanding your duties is not optional.
Director duties under the Corporations Act 2001 (Cth) (the Act) are extensive and the consequences of breach are personal. The duty to act in good faith, the duty of care and diligence, the obligation to avoid conflicts of interest, and the insolvent trading provisions all carry personal liability. Many directors do not fully understand the scope of these obligations until they face a claim or regulator investigation. At that point, the gap between what they understood their duties to be and what the law actually requires becomes expensive.
- We will advise on your duties as a director under the Act and any other applicable legislation.
- We will assess the specific situation you are facing and advise on how your duties apply to it.
- We will advise on the steps needed to properly discharge your duties in the circumstances.
- We will advise on how to document your decision-making process to protect your position.
- We will identify any risks of personal liability and advise on strategies to manage them.
When you need to understand what your directorship actually requires of you
What's included in your director duties advice
- Director duties and obligations review.
- Situation-specific duty analysis.
- Decision documentation guidance.
- Conflict of interest management advice.
- Personal liability risk assessment.
Director liability is personal. Understanding your duties is the first line of protection.
Directors who find themselves facing personal liability under almost always look back and identify a point at which earlier advice would have changed the outcome. The insolvent trading claim that could have been avoided if the director had taken legal advice when the company first showed signs of financial difficulty. The conflict of interest that was not disclosed because the director did not understand the obligation. The decision that was made without adequate inquiry because the director did not appreciate the duty of care. These are the predictable results of directors acting without a clear understanding of what the law requires.
From uncertainty about your obligations to confident, informed directorship
We give you a clear picture of what your duties require in your specific situation. Not a general summary of the law, but specific advice on what you need to do, what you should not do, and how to document your decisions in a way that protects you. Understanding your obligations allows you to discharge them confidently and to demonstrate, if your decisions are ever challenged, that you acted properly.
From uncertainty about your obligations to confident, protected directorship.
Situation and context
We take instructions on your role, the company's circumstances, and the specific situation you are facing.
Advice and analysis
We advise on how your duties apply to the situation and what you need to do to discharge them properly.
Documentation and protection
We advise on how to document your decision-making and manage any ongoing risks.
Corporate lawyers with deep experience advising directors on their duties and obligations.
We know that being a director is a serious responsibility and that the legal framework governing directorship is complex. We also know that most directors want to get it right, they simply need clear, practical advice on what that requires. Our team has advised directors across a wide range of company types and situations, from routine governance questions to complex liability risks.
We understand you want to know the cost, before we get started.
We will map out our process, from beginning to end, so you know what the journey will look like before you get started.
We will provide you with a clear and detailed Work Proposal covering each step along the way.
Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.
Our great lawyer guarantee
We want to be part of your team over the long term. We achieve this by adhering to these core principles:
Take the time
We listen carefully to understand what you want to achieve. Then we thoroughly explain our advice and step you through the documents. You can be sure you know the full consequences.
Share our knowledge
We will pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
Stick to our knitting
We only do what we're good at. You can be confident that we know what we're doing and don't pass on the cost of our learning.
Work as one team
Someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
Fair pricing
For advice and documents, we provide a fixed or capped quote so you don't take price risk. If you're in a dispute, we map out the process and costs so you know what to expect.
It's your show
We're not in this for our egos. We're in it for a front row seat to witness your success.
