Whether you are an existing company director or are considering stepping into such a role, it is imperative that you are fully aware of your responsibilities and obligations as a company director.

Here are seven points that should guide your actions:

1: Act in Good Faith

A director is legally obligated to always act honestly and for proper purposes. They must act in the best interests of the company, putting the company’s interests before personal interests and avoiding conflicts of interest wherever possible.

2: Act with Care & Diligence

A director is legally obligated to exercise their powers with the same care a reasonable person would in those circumstances. This requires a director to stay informed and make enquiries regarding the company affairs and financial position in order to make informed, good-faith decisions.

3: Ensure Solvent Trading

A director is responsible for ensuring that a company can meet its debts as and when they fall due. A director is required to cease trading if the company becomes insolvent, and directors can expose themselves to personal liabilities for company debts incurred while trading insolvent.

4: Director Penalty Notice

Directors can be deemed personally liable for a company’s unpaid taxes, superannuation and ASIC fees. It pays to do your due diligence on outstanding debt before becoming a director of an existing company.

5: Keep Proper Financial and Company Records

It is a director’s responsibility to ensure that the company keeps proper financial records that correctly record and explain its transactions and financial position. Company registers, minutes of meetings and resolutions must also be documented and kept up to date at all times.

6: Director of Corporate Trustees

As a director of a corporate trustee, you hold dual responsibilities: you must satisfy your general statutory duties under the Corporations Act 2001 while ensuring the company complies with Trust Law and the specific requirements of the Trust Deed.

7: Director Identification Number (DIN)

All Directors need to first apply for a DIN before they can be appointed. The aim of this regime is to prevent fraudulent identities and combat illegal ‘phoenixing’, where companies are deliberately liquidated to avoid paying debts, only for another company with the same characteristics and participants to surface.

There is, of course, a lot to consider with the above information, and it can seem alarming, but be reassured that in 99% of cases, as a director, you are already doing all of this without realising it.

If any of these points are concerning you, Smith Thornton can be of assistance to discuss your concerns and make changes if and when necessary.