What are directors' duties under the Corporations Act?

Accepting a Directorship is not just a title; it is a legal burden. Directors control the company and therefore owe strict duties to the company (specifically its shareholders and creditors).

The Core Duties

The Corporations Act 2001 (Cth) codifies the main duties:

1. Care and Diligence (s 180): You must apply the degree of care and diligence that a reasonable person in your position would exercise. You cannot simply trust “the accounts guy”—you must understand the financials yourself.
2. Good Faith (s 181): You must act in good faith in the best interests of the corporation and for a proper purpose.
3. Use of Position/Information (ss 182-183): You cannot use your position or inside information to gain an advantage for yourself or someone else (Conflict of Interest).
4. Insolvent Trading (s 588G): Crucially, you must prevent the company from incurring debt if it is insolvent (unable to pay debts when due). If you breach this, you can be made personally liable for the company’s unpaid debts.¹

Consequences of Breach

• Civil Penalties: Fines of up to $200,000+.
• Compensation: Court orders to pay back money lost.
• Disqualification: Banned from managing companies for 5+ years.
• Criminal Charges: If the breach was reckless or dishonest, you can face up to 5 years imprisonment.

Related Topics

• Pty Ltd vs Sole Trader
• Partnerships
• Commercial Law Practice Area

Governance Advice

Bell & Senior advises boards and individual directors on compliance and risk management. If your company is in trouble, seek advice immediately to access “Safe Harbour” protections.

Director questions? Contact us for confidential advice. Call (07) 5532 8777.