In addition to the requirements of ensuring compliance with general and specific laws applying to the company’s operations, the most important duty of a director is to protect its stakeholders. A director’s duties comprise of promoting good governance and to protect the company.
As per the law, directors should:
- Be honest and careful in their dealings at all times;
- Be always informed and updated about the company’s activities;
- Be cautious and should take extra care if the company is operating a business where it is required to handle other’s money;
- Ensure that the company pays its debts on time;
- Ensure that the company’s financial records are well maintained and up to date; and
- Maintain confidentiality and use information in the best interests of the company and its stakeholders.
Duties imposed by the Act on a director of a company include:
- Duty to exercise powers and duties with proper care and diligence as a man of prudence, including taking steps required to ensure that the director is properly informed about the financial position of the company and ensuring that the company does not trade, if it is insolvent;
- Duty to exercise the powers and duties in good faith, in the best interests of the company and for a suitable and appropriate reason; and
- Duty not to improperly use the position to gain an advantage for himself/herself or someone else or to cause detriment to the company.
Director stands out to be liable if he/she does not prevent the company from incurring a debt in a situation:
- When the company is already insolvent at the time the debt is incurred; or
- By incurring that debt, or by incurring a range of debts including that debt, by which the company becomes insolvent; and
- At the time of incurring the debt, there are reasonable grounds for suspecting that the company is already insolvent or would become insolvent by incurring the debt.
Responsibilities of a director of a company include:
- Notifying and/or informing the Australian Securities and Investments Commission (ASIC) any changes made to the form and structure of the company through submission of required documents, forms and notices;
- Maintenance of company’s books, registers, accounts and records for inspection by authorised persons;
- Playing a major role while displaying the company’s details as to the ‘ACN’ or ‘ABN’ which should be displayed on the common seal of the company. The director is also responsible for displaying all and every public documents and the documents required to be published as per the rules and regulation of the ASIC;
- Maintenance of secrecy and privacy of all information which are very much personal and collected in course of the day;
- Protection of any Intellectual Property right; and
- Keeping track of the taxes that a business is required to pay as per regulation of the Australian Taxation Office and also making the payment of the same.
A director should be updated on what his/her company’s activities are, including:
- Finding out and assessing any proposed action which might affect the company’s performance, especially in cases where it involves a lot of the monetary transactions;
- Seeking professional advice from outside whenever more details are required to make an informed and proper decision suitable to the company;
- Regularly taking an update from the managers and staff in relation to their knowledge about how the business is running and its growth; and
- Taking an active participation in the directors’ meetings.