This recent news article is a sad illustration of a person who as a Director of failed company says she was not aware of her duties as a director.
Not only did she not know what her duties as a director were (and went on a massive spend up of company funds on her lifestyle) but the article reports she also had no idea about what the business of the company even was.
It is important to remember that if you are a director of a company, you must comply with various obligations under the Corporations Act – and ignorance is no defence.
As a director, you must be involved in the management of the company and in a position to guide and monitor the management of your company. You should only agree to become a company director or secretary if you are willing, able and have enough time to put in the effort.
You should avoid situations where someone offers to appoint you as a director or secretary on the promise that ‘you won’t have to do anything’ and ‘just sign here’. You could be exposing yourself to significant personal liability if you accept such a role.
The following list does not cover every duty you may have or every possible circumstance, but if you follow them you are unlikely to be in breach of your obligations if you:
- know and understand the business your company is involved in;
- are honest and careful in dealing with the company and on its behalf with others;
- understand your legal obligations and make compliance with them part of your business;
- keep informed about your company’s financial position and performance, ensuring your company can pay its debts on time and keeps proper financial records;
- give the interests of the company, its shareholders and its creditors top priority, which includes acting in the company’s best interests (even if this may not be in your own interests) and using information you get through your position properly and in the best interests of the company, and
- get professional advice or more information if you are in doubt.
Certain people are not allowed to act as a director or secretary without court consent, while others may be banned from doing so by ASIC. If you’re not allowed to be a company director or secretary, you are also not allowed to manage a company. It is a serious offence to set up dummy directors while you really manage the company.
If you are unsure about your obligations as a director, then do seek professional advice so that you are aware of your obligations. Questions? We’re always happy to answer them, simply get in touch.