Director’s Duties: what are they?

A director of a company has a range of legal duties including to make sure the company complies with general and specific laws relating to the company’s operations.

The general duties of a director are set out in the Corporations Act 2001 (Commonwealth).

A director must exercise his or her powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation’s circumstances and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of care and diligence, and their equivalent duties at common law and in equity, in respect of the judgment if they:

1. Make the judgment in good faith for a proper purpose; and
2. Do not have a material personal interest in the subject matter of the judgment; and
3. Inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and
4. Rationally believe that the judgment is in the best interests of the corporation.

The director’s or officer’s belief that the judgment is in the best interest of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.

A director must exercise their powers and discharge their duties in good faith in the best interests of the corporation and for a proper purpose.

We will explore in later articles further the general duties of a director.

If you require advice or have a dispute relating to director’s duties, please contact Steve McAuley of our office.
By Steve McAuley, Principal Solicitor, Accredited Specialist – Commercial Litigation
McAuley Hawach Lawyers
11 Fennell Street, Parramatta NSW 2124
Telephone: (02) 9633 1826
Facsimile: (02) 9687 8114 (02) 9687 8114

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