Do you understand you responsibilities as a Director?
Being a director of a company comes with certain privileges and responsibilities, which must be managed with care. If you don’t stay on top of your responsibilities as a director, you can end up in significant financial and judicial trouble as a result. If at any stage, you are unsure about the position of your company or your obligations as a director, seek professional advice immediately.
Directorship’s come with a duty of care to the company and any shareholders it may have. As a director, there are numerous requirements you are personally responsible for under the Corporations Act 2001. These include, but are not limited to;
+ Duty to exercise your powers and duties in good faith in the best interest of the company;
+ Being fully aware of the company’s financial position;
+ Duty not to improperly use your position to gain an advantage for yourself or someone else, or to cause detriment to the company;
Furthermore, the Corporations Act 2001 also imposes responsibilities on the company, which you as a director are responsible for. The responsibilities of a company include:
+ Having a current registered office;
+ Having a principal place of business;
+ Disclosing personal details of directors;
+ Keeping financial records;
+ Notifying ASIC of key changes;
+ Paying relevant fees to ASIC;
Similarly, directors of companies in financial distress may be in a compromising position – Insolvent trading is a criminal offence and directors who engage in it can be sentenced to jail. Insolvency is defined as being unable to meet and repay all debts as they are due. This means that as a director, you must carefully consider the financial position of the company before incurring any new debts. A failure to keep adequate records or ignorance to the company’s financial position are both presumed to be acts of insolvency by regulators.
Read more about this in our Difficulty Guide