What are my duties as a director of a company?
To avoid conflicts of interest
Directors also have a duty to avoid any actual or potential conflict between their interests and the interests of the company. This arises from the duty of a director to act in the best interests of the company.
To prevent the company from continuing trade if it is insolvent
A director has a duty to prevent the company from incurring additional debt if there is a reasonable suspicion that the company cannot pay its debts when it falls due. This duty is not exercised for the benefit of the shareholders, rather it is exercised for the benefit of the creditors.
Other duties and responsibilities
There are numerous other laws affecting trade practices, taxation, environmental protection, and occupational health and safety that apply to companies. A breach of those other laws may give rise to a director being held liable for the breach.
Summary
If you are a director of a company, it is important to be aware of the core responsibilities and duties that have been imposed upon you by the law. While your primary duty is towards the company, you also have duties towards the shareholders, creditors, and the public. The failure to comply with these duties may result in directors being held personally liable for breaches of these duties. If you are unclear about the duties you should comply with or you are unsure of where you stand, you should seek legal advice as soon as possible.
About the author
Kenneth Ti is an Associate Solicitor with Phang Legal and a graduate from the University of New South Wales. He has a background in financial services and insurance, and is focused on commercial and intellectual property matters. Kenneth is a strong believer in community services and pro bono work.