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Understand your duties as a director

We tell you what you are personally on the hook for, and what to do about it.

A directorship is a personal legal position, not a title on a letterhead. The duties are yours, they cannot be delegated, and the liability that follows a breach reaches your own assets. Most directors want to get it right. What they need is someone to tell them plainly what right looks like in the situation in front of them.

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Applied to your actual decision

Advice on the matter in front of the board rather than a general summary of the duties.

The record that protects you

How to document the inquiry and the reasoning, which is where most of the protection sits.

Exposure identified early

Personal liability risks named while there is still time to do something about them.

What a directorship actually puts on you

A company is a separate legal person, but its directors are not shielded from everything it does. The Corporations Act 2001 (Cth) places duties on directors personally.

Those duties are to act in good faith and for a proper purpose, and to exercise care and diligence. Also to avoid improper use of your position or information, and to prevent the company trading while insolvent. Breach can bring civil penalties, compensation orders and disqualification. In serious cases it is criminal. The company cannot absorb any of that for you.

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What are a director's main duties?

To act in good faith in the best interests of the company and for a proper purpose. To exercise care and diligence. To avoid conflicts and not misuse your position or company information. There is also a duty to prevent the company incurring debts while insolvent, which carries personal liability.

What does care and diligence actually require?

The standard is what a reasonable person in your position would do. In practice that means attending meetings, reading the board papers before you vote, and asking questions when something is unclear. It also means getting independent advice when the matter warrants it.

What is the business judgment rule?

A safe harbour for decisions made in good faith, for a proper purpose and without a material personal interest. You also have to inform yourself to a reasonable extent and rationally believe the decision is in the company’s interests. It protects commercial judgment from hindsight. It does not protect a decision made without proper inquiry.

What is safe harbour for insolvent trading?

It can protect a director from personal liability for debts incurred while developing a course of action. That course has to be reasonably likely to produce a better outcome than administration or liquidation. It depends on acting early and documenting it. If you are worried about the company’s position, the time to get advice is now.

The liability is personal, and the company cannot absorb it for you

What protects a director is the inquiry made before the decision and the record kept of it. Both have to happen at the time.

The company is a separate legal person. You are not

Most directors have a rough sense of the duties and have never had them applied to anything specific. The gap only matters at the moments that count. A decision taken without enough inquiry. A conflict that felt too minor to declare. A run of months where the company kept trading on hope.

What makes this different from other commercial risk is that it does not stop at the company. An insolvent trading claim is made against you, and paid out of what you own.

We will advise on your duties as a director under the Corporations Act 2001 (Cth).
We will apply those duties to the specific situation or decision in front of you.
We will advise on what you need to do to discharge them properly.
We will advise on how to record your decision-making so it can be defended later.
We will identify your personal liability risks and advise on how to manage them.

When a decision is coming and you want to know where you stand

You are a director and you want to know clearly what the role requires of you. Perhaps the company is under financial pressure, or a significant transaction is in front of the board. Perhaps there is a conflict you need to handle properly. Perhaps you have just been appointed and would rather understand the obligations now than learn them later.

What's included in your director duties advice

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Personal liability is decided on what you did before you knew it mattered

Directors who end up personally liable can almost always point to the moment earlier advice would have changed the outcome.

The insolvent trading claim that turns on the four months between the first sign of trouble and the phone call. The conflict never declared because it did not feel like one. The decision approved without reading the papers, which looked fine until the transaction failed. None of these look serious at the time. They are all reconstructed later by someone whose job is to find them.

From a rough sense of your duties to a position you can defend

We look at the situation actually in front of you and tell you what your duties require in it. Whether the inquiry made was enough, and whether the interest has to be declared. Whether the company is at the point where continuing to trade becomes a personal risk.

Then we deal with the record. A director who took advice, asked for the right information and recorded why a decision was made is in a strong position. A director who did the same and wrote none of it down is not. Most of the protection is in the second half.

How the advice works

From a rough sense of your duties to a decision you can defend.

Your role and the facts

We take instructions on your position, the company's circumstances, and the decision you are facing.

What your duties require

We advise on how the duties apply here and what you need to do to discharge them.

Record and protect

We advise on documenting the decision and managing any continuing exposure.

Advice to directors on their duties and personal exposure

Directors rarely get into trouble through dishonesty. They get there by being busy, trusting the person who prepared the papers, and not asking the question that afterwards looks obvious.

We advise directors on how their duties apply to the decision actually in front of them, rather than in the abstract. That includes the safe harbour provisions where a company is under financial pressure, and how to record a decision so it can be defended later. We have 2 Accredited Specialists in Business Law.

Our great lawyer guarantee

Six principles we hold to, whatever you bring us and however long it takes.

Take the time

We listen carefully to understand what you want to achieve, then step you through the advice and the documents.

Share our knowledge

We pass on as much as we can, so you can make your own informed decisions.

Stick to our knitting

We only do what we are good at, so you never pay for our learning.

Work as one team

Someone is always available to answer your question or point you the right way.

Fair pricing

A fixed or capped quote for advice and documents, so you do not carry the price risk.

It is your show

We are in it for a front row seat to witness your success, not for our egos.

Get advice before the decision, not after it

Director liability is judged on what you did at the time, so advice is worth most before the decision rather than after it. Tell us what is in front of the board and we will tell you what your duties require and how to record it.

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