Reading time: 3 minutes

Being the Director of an incorporated business is no small feat. While Directors undoubtedly enjoy a position of privilege and power vis-a-vee their workers, they are also subject to very specific obligations, know as Directors duties, under both the common law and statute. One such duty that Directors must adhere to is known as the duty of care and diligence. A breach of the rule not only calls into question the internal management of a company, but also pierces the corporate veil and allows creditors and alike to hold the Director personally liable for any wrongdoing. As such, it is paramount that all Directors and business owners are well acquainted with the scope and breadth of the duty of care and diligence, lest they fall victim to it.

Scope of the Duty

The duty of care and diligence holds that a Director of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a Director of the corporation.

What a reasonable Director would do in the circumstances is a question of fact that will ultimately depend upon the contextual surroundings of the situation. Nevertheless, it can be stated that a reasonable person would be one that possesses the same level of knowledge and ability as the Director in question.

Accordingly, there is no single standard of care and diligence, and a higher standard of care may be expected of those who possess special skills, abilities, training, know-how and/or experience.

Directors' Duties Complete Guide

If you are a company director, complying with directors’ duties are core to adhering to corporate governance laws.
This guide will help you understand the directors’ duties that apply to you within the Australian corporate law framework.

Download Now

Discharging the Duty

To discharge the duty of care and diligence, a Director must:

  • possess a general understanding of the business;
  • possess a general understanding of the effects that changes in the economy may have on the business;
  • not shut their eyes to corporate misconduct;
  • not engage in an illegal course of action;
  • monitor the affairs and policies of the business; and
  • take reasonable steps to guide and monitor the management of the company, just to name a few.

What about delegated activities? A Director is certainly entitled to delegate and entrust other officers of the company with the performance of specific tasks and activities. Relying on the advice, judgment and knowledge of others is an integral part of any business. However, Directors must be cautious when delegating work, for the duty of care and diligence may be breached when tasks are allocated to an officer in circumstances where it is unreasonable to rely on the information, judgment and or advice of the delegate. Furthermore, delegation may not be allowed where the company constitution prohibits it.

Piercing the corporate veil

I’m sure you have heard or read that Directors enjoy limited liability. That is that the wrongdoings of a company or its agents cannot be attributed personally to the Director. While this is true in most cases, the law recognises specific instances where the corporate veil may be pierced, and the Director held personally liable. A breach of the duty of care and diligence is one such situation.


Would you like to know more about the Director’s duty of care and diligence, its scope or the availability of defences open to the same? Our friendly team of LegalVision lawyers would be happy to assist you with any question or queries that you may have. Call us today on 1300 544 755 to see how we may help.


Everything You Need to Know about SaaS Agreements

Thursday 7 April | 11:00 - 11:45am

Understand which contracts will protect your SaaS contract from risk, and how. Register for free today.
Register Now

What to Consider When Buying a Tech or Online Business

Wednesday 13 April | 11:00 - 11:45am

Learn how to get the best deal when buying a tech or online business. Register for our free webinar today.
Register Now

Corporate Governance 101: Responsibilities for New Directors

Wednesday 27 April | 11:00 - 11:45am

If you are a new company director, join our free webinar to understand your legal compliance obligations. Register today.
Register Now

Rogue Directors and Business Divorces: How to Remove a Director

Thursday 28 April | 11:00 - 11:45am

Removing a board director is not simple. Join our free webinar to learn how to handle rogue directors. Register today.
Register Now

Employment Essentials for Tech Businesses

Thursday 5 May | 11:00 - 11:45am

Protect your tech business and your employees by understanding your employment legal obligations. Register for our free webinar today.
Register Now

How to Protect and Enforce Your Trade Mark

Wednesday 11 May | 11:00 - 11:45am

Protect your business’ brand from copycats and competitors. Register for this free webinar to learn how.
Register Now

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer