Company Director Responsibilities
Many of even the smallest businesses these days organise themselves as an incorporated entity – usually a proprietary limited company – and appoint themselves as Directors of that company.
Assuming the title “Director” might offer some cache, but it also brings you under the rules of the laws governing all incorporated entities. In Australia, that’s the Corporations Act 2001, and it imposes obligations on all directors, even those whose shareholders consist solely of themselves.
What Are Your Obligations?
The Australian Securities and Investments Commission is charged with administering the Corporations Act, and according to its website, as a Director you are obliged to:
- be honest and careful in your dealings at all times
- know what your company is doing
- take extra care handling other people’s money
- make sure that your company can pay its debts on time
- see that your company keeps proper financial records
- act in the company’s best interests, even if this may not be in your own interests.
It’s important to realise that a Company is an “entity or being” under the law to which you, as a Director, have an obligation. This might seem a bit queer to those who “see themselves as the Company”, but the Law takes a quite different view, and requires Directors to “act in the best interests of the company” even when that may mean disadvantaging yourself.
For more on this, see the ASIC site.
Time For Some Training?
The Australian Institute of Company Directors (AICD) has been offering company directors the opportunity to gain or refresh knowledge of their duties and responsibilities since 1975 and their site offers a wealth of information and is worth a browse by any Director, old or new.
Why not take the easy way out, and simply pay professionals to tick the boxes, lodge the returns and carry out your Director’s obligations for you? Well, we’d endorse using professional experts, that’s for sure, but we’d also endorse your knowing enough to judge the quality of what they are providing.
The ASIC website puts this point very succinctly when it states that “even if you appoint an agent to look after the company’s affairs, you – not the agent – may still be held responsible for those legal obligations.”
To refresh or begin your Director’s journey, you’ll find help on the AICD website.
