When asked by that trusting friend/colleague to join them as a Director in their company…. Are you aware of the responsibilities that you are signing up for? Being a silent Director, does not mean that your duties as a Director are silenced. You can be prosecuted just the same, should something go wrong!
Read on, as we explore the nitty gritty of Directors Duties, Corporate Responsibilities and Consequences of non-compliance.
Who is ASIC and why do they exist
The Australian Securities and Investments Commission (ASIC) is an independent Australian Government body that acts as Australia’s corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors.
Being a Director of a company; your responsibilities
As a Director of a company you are responsible for the management of the affairs of the company. You must comply with your legal obligations as a director under the Corporations Act 2001. This is the case even if you have appointed Halpin Partners Accountants as your ASIC registered agent to look after your company’s affairs. There are numerous and important legal responsibilities imposed on directors under the Corporations Act 2001.
Of these duties, some of the most significant are:
- to act in good faith in the best interests of the company and for a proper purpose
- to exercise care and diligence
- to avoid conflicts between the interests of the company and your personal interests
- to prevent the company trading while insolvent (i.e. while it is unable to pay its debts as and when they fall due)
- if the company is being wound up, to:
- report to the liquidator on the affairs of the company
- help the liquidator (e.g. by giving the liquidator the company books and records that you may have in your possession).
Incorporating a company; your responsibilities
The Corporations Act 2001 also imposes responsibilities on the company. As a director of the company, you are responsible for ensuring that the company complies with these obligations. These responsibilities include:
- having a current registered office
- having a principal place of business
- disclosing personal details of directors
- keeping financial records
- notifying ASIC of key changes
- paying relevant fees to ASIC
- checking annual statements
Consequences of failing to perform your duties as a director
If you fail to perform your duties as a director, you may:
- be guilty of a criminal offence with a penalty of up to a maximum of $200,000, or imprisonment for up to five years, or both
- have contravened a civil penalty provision (and the court may order you to pay to the Commonwealth up to $200,000)
- be personally liable to compensate the company or others for any loss or damage they suffer
- be prohibited from managing a company.
It is important to consider the various obligations, risks and responsibilities before agreeing to take on a directorship within a company. Before taking on a directors role, we always recommend discussing your plans with your accountant and solicitor.
Content sourced from: www.asic.gov.au
