Company Director Duties in Australia: What the Law Requires
A director is more than a manager
When you are a director of a Pty Ltd company in Australia, you are not simply the person running the show — you take on a set of legal duties under the Corporations Act 2001 and related laws. Breaching these duties can lead to personal liability, fines and, in serious cases, criminal proceedings.
Many small business owners become directors without fully understanding the duties that come with the role. This article gives you the broad picture — it is not personal legal advice.
The core duties of a director
Duty of care and diligence: A director must act with the degree of care and diligence that a reasonable person would show in a similar position. This means actively seeking out information, attending meetings and taking part in the company’s decisions — you cannot simply leave it to others.
Duty of good faith: A director must act in the best interests of the company and for a proper purpose — not for their own benefit or that of a third party at the company’s expense.
Duty to avoid conflicts of interest: If a director has a personal interest in a company decision (for example, a transaction with a related party), they must disclose it and, in many cases, abstain from voting.
Duty not to use position or information improperly: A director must not use their position or inside information to gain a personal advantage or to harm the company.
Insolvent trading — a particularly important risk
This is a duty that many directors breach without realising it: a director must not allow the company to keep trading once it has become unable to pay its debts (insolvent).
If the company incurs debts while insolvent and the director knew (or should have known) that the company was insolvent, the director can be pursued personally for those debts.
Warning signs to watch for:
- Being unable to pay suppliers on time
- Relying on new loans to pay off old debts
- ATO notices about unpaid tax
- Not having enough money to pay wages or super
When you notice these signs, seek advice from an accountant and a solicitor straight away — do not keep trading without professional input.
Director Penalty Notice (DPN)
As covered in the related guide on ATO tax debt: a director can be pursued personally for the company’s unpaid PAYG withholding and super through a Director Penalty Notice. This is a separate legal mechanism, on top of insolvent trading liability.
ASIC obligations — reporting and notifications
Directors have a duty to make sure the company meets ASIC’s reporting requirements:
- Updating the registered address and director details when they change
- Paying the annual review fee when ASIC requests it
- Keeping company records and books properly
Check the specific obligations and deadlines at asic.gov.au — some changes must be notified within a set time after they occur.
Who can be a director?
To be a director of an Australian company, you must:
- Be at least 18 years old
- Not be disqualified from holding the role of director — for example because of bankruptcy or a previous breach of the law
- Have at least one director who is ordinarily resident in Australia (this can change with the law — check the current requirements at asic.gov.au)
When to get legal advice
If you are thinking about resigning as a director, are worried about the company’s financial position, have received a notice from ASIC or the ATO relating to director duties, or are in a dispute with shareholders or creditors — these are the times to consult a solicitor experienced in corporate law, not just an accountant.