When someone is appointed as the director of a company it is normally a very exciting time. There is the anticipation of becoming recognized as a leader in a particular field of endeavor and being given the responsibility of managing a company which may be very small or very large. There are however, a number of duties which people are normally unaware of in relation to the operation of company law. However, Directors only go unaware of these aspects of company law at their peril and it is essential that Directors know what duties that they need to fulfill so that they may not later be accused of breaching their duties as a director and being exposed to the consequences of a breach of director’s duties.

What are the duties of a director of a company?

In recent years, the laws relating to corporate governance have been tightened substantially which had lead to a far greater scope of directors duties being imposed. In the USA, the Sarbanes Oxley Legislation was introduced because of growing concerns by shareholders, creditors, and employees, directors and employees in management are more accountable for their governance style and behaviour.

In Australia, the Corporations Act 2001 (Cth) provides the legal framework for the duties of a director. The legislation gives enormous powers for the Australian Securities and Investments Commission to investigate breaches of directors duties and punish directors for breaches of the legislation with civil penalties. In very serious cases, it can even lead to imprisonment. The duties set out in the Corporations Act 2001 mainly relate to the duties of directors towards employees and management.

It is also true that in this case, ignorance is no defense in the eyes of the law. If you are a company director, the law assumes that you have an understanding of the laws which relate to directors duties and how you must act and behave in order to fulfill your duties. In particular, some of the things which a director must do to avoid personal liability for the debts of the company if it fails are:

a) When appointed to management, the director must examine past financial statements of the company.

b) Directors must attend board meetings on a regular basis.

c) Directors must ensure that the company maintains accounting records in accordance with its legal obligations.

d) Directors must ensure that either the management of a company verifies information given by officers and employees of the company.

e) Directors must ensure that they obtain professional advice in order to make informed decisions about matters which affect the company.

We are an organisation that provides services to the directors of companies on a regular basis and we fully understand the business pressures which company directors are put under. If you would like some advice or information to help you relieve some of this pressure, we would be more than happy to talk with you. This is only a very brief introduction to the law of directors’s duties and if you have any further questions about the legal duties of a director, we encourage you to contact us by filling out the form on the right or by contacting us viewing out contact page with office locations.