If you are a director of a company, you need to be aware of the rules, regulations and legal responsibilities regarding that role in the company. This section is focused on the Australian legislation relating to directors’ legal responsibilities. These general principals also apply in most of the countries that allow business owners to set up companies to operate their business. Company directors are subject to a number of common law and statutory directors’ duties in Australia.
These duties are designed to promote good governance of companies and ensure that directors act in the interests of the company – including putting the company’s interests ahead of their own. As mentioned earlier in section 2.1, one of the advantages, from a legal perspective, of a company structure is that a separate legal entity operates the business and, in most circumstances, protects the individuals behind the company from any personal liability. However, an abuse of this protection has seen unscrupulous directors hide behind the company to incur debts that they know cannot be paid. The law has developed over time to protect third parties dealing with these unscrupulous directors.
Clearly the circumstances that give rise to a breach of one duty may overlap with a breach of another duty. However, Australian law recognises each as a separate breach of duty, and may often result in the breach of a number of other duties as well. A number of defences may be raised by directors to allegations of breaches of duties.
For further advice on breaches of duties, I strongly recommend speaking to your lawyer to discuss what actions should be taken to protect yourself.
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