What are Company Directors?

Company directors are officers of the corporation
and are bound by a number of common law,
equitable and statutory duties.

Company directors that are found to be in breach of their directors duties can be liable for significant pecuniary penalties or even imprisonment.

Under the Corporations Act (2001) a director is defined as someone who makes decisions that affect a substantial part of the corporation’s business or has the capacity to significantly affect it’s financial standing. A person who has not actually been formally appointed as a director may nonetheless be considered a director either as a de facto director or a shadow director.

A de facto director is a person who has not been appointed as a director  but who is acting as the director of a company. By engaging or participating in the decision-making processes as part of the governing structure of the company, a person may be deemed to be a de facto director. According to Corporate Affairs Commission v Drysdale a de facto director is bound by all the ordinary directors’ duties as if they were formally appointed to the position.

A shadow director is a third party who attends board meetings and imposes requirements on a company which must be followed as a pre-condition to giving permission for a transfer of contractual rights. This was illustrated in Buzzle Operations Pty Ltd (in Liq) v Apple Computer Australia Pty Ltd, where Apple’s control over the board’s decision making was considered significant enough to deem its representative a shadow director.

As a company director, a person will be responsible for the proper management of the company in accordance with the directors duties and obligations. The decision to become a company director should not be taken lightly, as it carries significant risks. A company director can in certain circumstances become personally liable for debts caused by the poor management of the company.

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