Director’s Duties: what are they?

Jan 12, 2023 | Publication

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.

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. If you do not wish to receive newsletters from us, please let us know.

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