To be a company director 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. Below, we answer who is eligible to be a director, what are a director’s responsibilities, and what are the company’s responsibilities.
Am I Eligible to be a Director?
For a proprietary company, at least one director must ordinarily reside in Australia. A publicly listed company must minimally have three directors, and two must ordinarily reside in Australia. The company must also update ASIC about any key changes including the appointment of a new director. If you want more information on who isn’t eligible to operate or manage a company in Australia, check out our article “Are you eligible to run a business in Australia?”
What are my Responsibilities as Director?
Under the Corporations Act 2001, there are many legal obligations and responsibilities imposed on directors in Australia, including:
- Exercising powers and discharging duties with the degree of care and diligence that a reasonable person would exercise if they were a director;
- 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 (i.e. when it is unable to pay its debts as and when they fall due); and
- If the company is wound up, to report to the liquidators on the affairs of the company and to help the liquidator when required.
A director who has a personal interest in a matter that relates to the company’s affairs must also give the board notice of the interest, and follow the Corporations Act requirements regarding a director’s potential conflict of interest.
What are the Company’s Responsibilities?
As a director of the company, you are responsible for ensuring that the company complies with its obligations under the Corporations Act, including:
- A current registered office in Australia and notifying ASIC of its location;
- Notifying ASIC of the principal place of business if it is different from the registered office;
- Informing ASIC of the full name, date of birth and current residential address of each of the company’s directors;
- Keeping up to date and correct financial records of the company. If you are a director of a larger company, you will also need to lodge financial reports with ASIC;
- Notifying ASIC of changes to the company including but not limited to the registered office, principal place of business, change of the company name, directors and shareholders;
- Paying the applicable fees to ASIC; and
- Ensuring the company’s details are accurate and up to date on the ASIC register.
Your Key Take Home Points
As you can see, there are many legal obligations and responsibilities you must comply with if you are or plan on becoming a director of a company in Australia.
Your key responsibilities will include:
- Understanding your legal obligations as a director of a company and ensuring compliance;
- Ensuring you keep up to date on your company’s financial position and performance;
- Ensuring your company can pay its debts as and when they fall due;
- Ensuring your company keeps proper financial records;
- Being honest in your dealings with the company and exercising caution with transactions;
- Putting the company, its shareholders and creditors at the top of the priority list;
- Always acting in the company’s best interest and avoiding potential conflicts of interest; and
- If you are ever in doubt, obtaining professional advice including accounting, tax or legal advice quickly.
You should only agree to become a company director or secretary if you have the time and ability to comply with these obligations and responsibilities.
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 require advice or assistance with your legal obligations in managing a company, get in touch with LegalVision’s commercial lawyers on 1300 544 755.