Company Directors Duties

Company directors have duties to the company that derive from specific
sections of the Corporations Act (2001) and case law
that has evolved over centuries.

There are serious consequences for directors who breach their duties which include significant pecuniary penalties and even custodial sentences.

Directors Duty to Act with Due Care, Diligence and Skill

Under section 180 of the Corporations Act (2001) company directors have an obligation to “discharge their duties with a degree of care and diligence that a reasonable person would exercise” if they were in such a position.

Directors Duty to Act in Good Faith

Company Directors have a duty under s 181 of the Corporations Act (2001) to act in good faith and in the best interests of the company. This generally means the the best interests of the shareholders, but not necessarily the stakeholders such as employees or creditors.

Directors Duty to Avoid Conflict of Interest

Company directors have a fiduciary duty to exercise their duties without conflict of interest. In the case of Regal (Hastings) Ltd v Gulliver, the directors who took advantage of a business opportunity instead of the company had to forfeit the proceeds from the deal to the company.

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