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In Australia, you must be at least 18 years old and provide written consent for taking on the role and responsibilities of a company director. This article explains who is eligible to be a company director and what responsibilities come with being a director. It also explores 

  • basic responsibilities of a company director.

Am I Eligible to Be a Company Director?

The Corporations Act 2001 (Cth) (the Corporations Act) provides the majority of legal requirements regarding companies’ structure, function, and operation. This includes information about the board of directors. Under the Corporations Act, companies fall into two main categories:

  1. private companies (Pty Ltd companies); or 
  2. public companies (Ltd companies).

There are different regulatory requirements for each. For example, the Corporations Act requires a private company to have at least one director, and that director must ordinarily reside in Australia. Conversely, a publicly listed company must have at least three directors at a minimum. Likewise, two of these directors must ordinarily reside in Australia.

Your company must notify the Australian Securities and Investments Commission (ASIC) of the details of its directors. Such details include each directors’: 

  • name; 
  • current address; and 
  • date and place of birth. 

This obligation is ongoing. Therefore, your company must update ASIC about any changes in its directors’ details or other key changes, such as the appointment or removal of a director.

What Are My Responsibilities as Director?

Generally, a director’s (or the board’s) role is the overall management and operation of the company. Directors are the key commercial, operational, risk and legal decision-makers. In addition to this overall role, the Corporations Act provides several specific legal obligations and responsibilities, which regulate the roles of directors in Australia. Key director responsibilities include:

  • exercising powers and discharging duties with the degree of care and diligence;
  • exercising powers and discharging duties in good faith in the best interests of the company and for a proper purpose;
  • not improperly using the position or information obtained as a director to gain an advantage or cause detriment to the company;
  • preventing the company from trading while insolvent; and
  • if the company is being wound up, reporting to liquidators on the company’s affairs and help the liquidator when required.

A director who has a personal interest in a matter related to the company’s affairs must also give the board notice of the interest. Additionally, they must follow the Corporations Act requirements regarding a director’s potential conflict of interest.

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What Are the Company’s Responsibilities?

As a company director, you are responsible for ensuring that the company complies with its obligations under the Corporations Act. These responsibilities include maintaining a current registered office in Australia and notifying ASIC of its location. You also want to notify ASIC of your company’s principal place of business if it is different from the registered office. Likewise, you need to inform ASIC of the full name, date of birth and current residential address of each company director.

Additionally, you must keep up to date and correct financial records of the company. If you are a director of a larger private company or an unlimited public company, you will also need to lodge financial reports with ASIC. You must also notify ASIC of changes to your company’s:

  • name; 
  • registered office; 
  • principal place of business; or
  • directors and shareholders.

Further, you must pay the applicable fees to ASIC and ensure the company’s details are accurate and up to date on the ASIC register.

Managing Your Risk

Given the significant responsibilities and legal obligations of directors, you should consider what measures are available to manage the risk you personally assume when becoming a director. Directors and officers insurance is one such measure. Insurance provides cover and protection, should any issues arise, or should you incur any personal liability due to your role as director. Usually, the company will take out directors and officers insurance for the benefit of the board. Also, the insurance policy will cover all past and present directors (subject to the specific terms of the policy).

Key Takeaways

The duties and responsibilities of a company director can be onerous. It is important that you are aware of these duties and responsibilities from the outset so that you can accurately assess whether you are willing and able to become a company director. The consequences of breaching your responsibilities can be severe. 

If you need help with whether you are eligible to be a company director our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What are the key responsibilities of a company director?

As a company director, your key responsibilities will include understanding your legal obligations as a director of a company and ensuring compliance. You also want to keep up to date on your company’s financial position and performance and ensure your company can pay its debts when they fall due.

What should I consider before becoming a director?

You should properly consider whether you have the time and ability to comply with all obligations and responsibilities. Also, research into the risk profile of the company, and the regulatory environment of the industry. Further, consider what measures the company has taken to manage the risk you adopt in becoming a director (such as D&O insurance).

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