It is important to know your duties as a director to ensure compliance in general and specific legislations. Directors who breach these duties may be subjected to civil and criminal penalties.
General directors’ duties:
General duties are imposed by the Corporations Act on directors and officers of the company which includes:
- The duty to exercise your powers and duties with the care and diligence
- Acting in good faith and in the best interest of the company
- To not improperly use your position to gain an unfair advantage for yourself or for someone else,
- To not improperly use information obtained through your position to gain an unfair advantage for yourself or for someone else, or to cause detriment to the company.
Duty to not trade while insolvent (Corporations Act Section 588G Insolvent Trading):
In addition to general director’s duties, you also have a duty to prevent the company from trading if it is insolvent. A director may incur civil and criminal liability for debts incurred during trading if there are reasonable grounds to suspect that the company is, or may become, insolvent. Hence it is important to be constantly aware of your company’s financial position.
Duty to keep books and records (Section 286):
Your company needs to maintain correct and adequate financial records to explain its financial position and performance. A director may become personally liable if they fail to take reasonable steps to ensure the company meets this requirement under the Corporations Act. In the situation of actions against the director for insolvent trading, the company will generally be presumed to have been insolvent during the period in which it has failed to keep adequate final records.
If you believe your company is in financial trouble or concerned about your duties as a director, you need to consult with an insolvency specialist. At CRS Insolvency Services, our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company while avoiding personal liabilities. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.