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If  you are a small business company director or thinking about a company structure for your business you need to be aware of the responsibilities of company directors.  There are numerous and important legal responsibilities imposed on directors under the Corporations Act 2001 and other laws, including general law. These apply to directors of all companies no matter what their size.

To assist small business owners to understand their role and responsibilities as company directors, ASIC has released a new online resource ASIC Guide for Small Business Directors. ASIC Commissioner Greg Tanzer said,  ‘Whether  you’re a current director of a small business, or newly appointed, it’s important to understand what’s expected of you.’

The guide covers the following topics:

  • What it means to be a company director
  • How to become a company director
  • Directors’ key responsibilities
  • Directors’ liabilities when things go wrong
  • How to resign as a director

The guide is intended only as an overview of directors responsibilities to assist particularly small businesses to understand their obligations. Nevertheless, even if you think you are on top of the requirements it is worth checking the guide as the list of responsibilities is large and onerous. Probably in the interests of PR the guide does not list the penalties associated with breaches of the Act but in most cases they include civil and criminal provisions.

If this has grabbed your attention, some of the points worth noting include:

  • You cannot treat what the company owns eg company property, assets and funds – as if they are your own. They do not belong to you, they belong to the company
  • If you act as a director even if you are not formally appointed, or give instructions to the appointed directors on how they should act, you may be considered a ‘shadow director’. Shadow directors can still be liable for breaches of the law relating to directors’ duties.
  • Of the numerous responsibilities imposed on directors some of the most significant include acting in good faith in the best interests of the company, to avoid conflicts between the interests of the company and the director’s personal interests and to prevent the company trading while it is unable to pay its debts as and when they fall due.
  • In addition, the Corporations Act imposes responsibilities on the company. As a director you are therefore also responsible for ensuring the company complies with its obligations.
  • Ominously the guide also points out that as a director, under certain circumstances you may be personally liable for the company’s debts and other losses even after the company has ceased trading and has been deregistered.

In the media release Commissioner Tanzer said, ‘Small business need clear and accessible information so they can make informed decisions about their business structure and meet their responsibilities.’  If you are in any doubt or want more information contact us at Riverwood Group where we can step you through the advantages and disadvantages of the company structure for your business. In the meantime, if you want to delve deeper the guide can be downloaded at www.asic.gov.au/sb-directors

 
 
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