Are You Breaching Your Directors Duties?
Australia has over 2.5 million companies registered with ASIC, of which 98% are proprietary companies. All companies have directors, with proprietary companies requiring a minimum of one, and public companies three.
Many directors of proprietary companies are the ‘mum’s and dads involved in operating the family business. Often, they are unaware of their directors’ duties under the Corporations Act 2001 which requires that they always act in the best interests of the company (which may be in conflict with their personal interests). The interests of the company must always come first.
Additional director’s duties include:
- Not using company information for an Improper purpose – i.e. competing against the company.
- Exercising care and diligence – what would a hypothetical ‘reasonable’ director do?
- Preventing insolvent trading.
- Keeping adequate financial records.