Part 2 of a 4-part series
Directors play an essential role in well-functioning organisations. However, as discussed in our previous article, contemplating whether to become a director is a complex decision that requires careful consideration.
This article explores the fundamental role and numerous duties and obligations that directors are entrusted with as part of their responsibility.
Directors’ Duties and Obligations
Duties to the Australian Securities & Investments Commission (ASIC)
Intending new directors must register for a director identification number (DIN) before being appointed. Civil penalties apply under S 1317E for eligible persons who do not have a DIN.
- Notify ASIC of changes of director, addresses, director, and shareholder changes.
- Complete and pay an ASIC annual statement which includes a resolution for solvency.
- Include the company’s ACN or ABN on all documents.
- Maintain a register of members and copies of minutes from meetings of directors or members.
- Directors or intending new directors must apply for their director ID before being appointed.
Duties and Obligations to the Australian Taxation Office (ATO)
- Lodge tax returns and Business Activity Statements (BAS) within prescribed time periods.
- Register employees correctly and properly assess whether a worker should be registered as an employee or a sub-contractor.
- Remit GST, PAYG Withholding and superannuation for employees, including eligible sub-contractors, within the statutory timeframes.
- Submit Tax Payments Annual Report (TPAR) on time.
Fiduciary duty of care under the Corporations Act and Common Law
- Duty to exercise care and diligence (S 180).
- Duty to act in good faith and for a proper purpose (S 181).
- Avoid conflict of interest.
- Duty not to engage in an improper use of a position of information to gain an advantage that results in a detriment to the company (Section 182-183). – using company information to gain an unfair advantage could be a crime.
- Fiduciary duty to act in the best interests of the company even if it is to the director’s personal detriment or conflicts with a director’s best interests.
- Duty to avoid insolvent trading (S 588G)
- You must know what the company is doing – ignorance rarely is an excuse.
- Duty to keep proper books and records that correctly record and explain the company’s transactions.
- Duties to trusts – incurring liabilities that cannot be paid back or as a breach of trust.
- Duty not to engage in reckless or dishonest actions. These actions could be a crime.
- Directors must hold meetings of members when requested by members who hold 5% of the votes and allow 21 days’ notice.
Other director obligations under other Acts
- Occupational Health and Safety
- Trade Practices
- Environmental Planning and Assessment Act
- Environmental Protection Authority
- Equal Opportunity
- Employment laws – Fair Work Act
- Human Rights Act
- Insurance and indemnities
- Privacy Act – (Notifiable Data Breaches) Cybersecurity
- Climate change
The decision to become a director should not be taken lightly. Whether an individual is considering registering a company and becoming a director, or becoming a director of a well-established company, understanding their duties and risks beforehand can help them make an informed decision and navigate the complexities of their role.
In conclusion, seeking the expertise and support of a professional can greatly assist directors with this task.
Part 3 of this 4-part series will outline the personal exposure and tips for a director.
If you are considering becoming a director or you are a director of a company experiencing difficulties and are concerned you may be personally exposed, please contact our liquidator and trustee in bankruptcy Anthony Bagala at dVT Group on (02) 9633 3333 or by email firstname.lastname@example.org.
dVT Group is a business advisory firm that specialises in business turnaround, insolvency (both corporate and personal), business valuations and business strategy support.