SPECIFIC DUTIES OF DIRECTORS TOWARDS COMPANY

Directors have particular responsibilities in certain situations.

Whilst the company and its business is trading the company must keep written financial records, so that a director can understand the company’s financial position at all times. Small proprietary companies are not required to prepare financial reports unless directed to by ASIC or otherwise required under the Corporations Act 2001 (Cth).

The company must lodge an annual statement which includes a resolution passed by the directors regarding the solvency of the company.

If the company is insolvent, or an external administrator is appointed, a director also has the following responsibilities:

  • A duty to prevent insolvent trading by the company as required by section 588G. Directors who breach this duty may find themselves subject to the civil penalty provisions of the Corporations Act 2001 (Cth). In some cases criminal liability may also arise.
  • A duty to assist an external administrator by providing the books and records of the company and completing the report as to affairs. An external administrator may also require the director to answer questions.

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