People contact us knowing they will receive

Legal Help.

What are the Duties of a Company Director?

The role of a company director is to govern a company on behalf of the shareholders or members of that company. Duties of a Company Director fall under the Corporations Act 2001 which sets out how a director must run a company. These duties are:

  • Duty of care;
  • Duty to avoid conflict of interest;
  • Duty to act in good faith;
  • Duty to act for proper purpose; and
  • Duty to prevent insolvent trading.

Duty of Care

This duty requires the director to exercise care and skill in the performance of their obligations to the company. The test to determine whether a breach of duty has occurred is an objective one. This means that the director’s actions are measured against what a reasonable person in the position of director would have done in a similar situation.

Duty to Avoid Conflict of Interest

The director’s personal interests must not conflict with those of the company. As such, a director cannot use their position as a director to acquire a personal gain for themselves or another, or use information that they acquire as a director to acquire a benefit for themselves or for another person. Directors may protect themselves from breach of this duty if they obtain member’s approval.

Duty to Act in Good Faith

Directors have to act in the best interests of the company. This means that the directors must act in the best interest of the company as a whole and not in the interests of individual members.

Duty to Act for Proper Purpose

Directors must exercise their powers for a proper purpose. Any use of director’s powers that are not undertaken for the benefit of the company are an improper use of their powers. For example, a proper purpose may be the issuing of shares includes raising capital, while an improper purpose includes diluting the shareholding of a particular shareholder or class of shareholders.

Duty to Prevent Insolvent Trading

Directors should prevent the company from trading when it is insolvent. Failure to do so may result in the director(s) being held personally liable for the debts of the company.

Civil Penalties

If directors breach their statutory duties, civil penalties may apply. Penalties may include a pecuniary penalty which is where the directors are required to pay money to the Commonwealth. Disqualification is another type of penalty banning a person from being a director of a company for a certain period of time. A director may also face a compensation order if the company has suffered a loss resulting from breaches of the director’s duties.

Criminal Action

The Director of Public Prosecutions (Cth) can bring the action for criminal breaches of director’s duties. It is important to remember that a director may be dealt with both criminally and civilly regarding the same conduct. However, not all breaches of director’s duties may result in criminal action.

Share on facebook
Share on twitter
Share on linkedin
Share on email


To provide sound

advice in an


Initiative to achieve

solutions that meet our

clients’ needs


To always provide
comprehensive help

from local lawyers
Family Law Border

Get In Touch

Contact us to discuss your situation and best course of action. We understand your 
time is valuable and offer consultations via
 Zoom, Skype, Microsoft Teams or phone
call. Let McNamara Law help you find your 
legal solution today!

Ipswich (07) 3816 9555

Springfield (07) 3470 3600

Gatton (07) 5462 1566

Want to join our team?

We pride ourselves on employing high-quality experienced team members
who are both friendly, supportive and approachable. We love it if you’re
local too! Please email your resume and cover letter to:

Peter Wilkinson | Managing Partner | peterw@mcna.com.au

Copyright 2020 McNamara Law. Site by Digimedia Worx | Liability limited by a scheme approved under professional standards legislation (personal injury work exempted)