5.3 Duties and liabilities of directors In managing the business...

5.3 Duties and liabilities of directors

In managing the business of a company (see 1.7), each of its directors is subject to a wide range of duties under the Corporations Act and other laws. Some of the more important duties are:

• to act in good faith

• to act in the best interests of the company

• to avoid conflicts between the interests of the company and the director's interests

• to act honestly

• to exercise care and diligence

• to prevent the company trading while it is unable to pay its debts

• if the company is being wound up--to report to the liquidator on the affairs of the company

• if the company is being wound up--to help the liquidator (by, for example, giving to the liquidator any records of the company that the director has).

A director who fails to perform their duties:

• may be guilty of a criminal offence with a penalty of imprisonment for up to 15 years or a fine, or both (the fine is the greater of 4,500 penalty units and 3 times the amount of the benefit derived and detriment avoided because of the offence); and

• may contravene a civil penalty provision (and the Court may order the person to pay the Commonwealth an amount equal to the greater of 5,000 penalty units and 3 times the amount of the benefit derived and detriment avoided because of the contravention); and

• may be personally liable to compensate the company or others for any loss or damage they suffer; and

• may be prohibited from managing a company.

A director's obligations may continue even after the company has been deregistered.

[Sections 180, 181, 182, 183, 184, 475, 530A, 588G, 596, 601AE, 601AH, 1317H]