Company Director Duties (Australia) FAQ

A director includes anyone validly appointed, anyone acting in the position of director regardless of title (de facto director), and anyone whose instructions the board is accustomed to follow (shadow director). The definition is intentionally broad to prevent avoidance.

Section 180(1) requires directors to exercise their powers with the degree of care and diligence that a reasonable person in the same position would exercise. This is an objective standard — it does not matter that the director personally believed they were acting carefully.

Section 180(2) provides a safe harbour where a director makes a business judgment in good faith for a proper purpose, without material personal interest, after informing themselves to the extent they reasonably believe appropriate, and rationally believing the judgment is in the company's best interests.

Section 181 requires directors to exercise their powers in good faith in the best interests of the corporation and for a proper purpose. Acting for a collateral purpose — such as issuing shares to dilute an opponent — breaches this duty even if the director believes the outcome benefits the company.

Section 182 prohibits directors from using their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation. This applies even after resignation and covers misuse of information obtained in the role.

Section 183 prohibits directors from using information obtained through their position to gain a personal advantage or cause detriment to the corporation. This overlaps with insider trading prohibitions and survives after the director leaves the company.

Chapter 2E requires member approval before a public company gives a financial benefit to a related party (including directors and their associates) unless an exception applies — such as reasonable remuneration, indemnification, or arm's length terms. Breach attracts civil penalties.

Section 191 requires directors to disclose material personal interests in matters relating to the company's affairs. The disclosure must be made at a board meeting and recorded in the minutes. Failure to disclose is an offence carrying penalties.

Section 588G prohibits directors from incurring debts when the company is insolvent or would become insolvent by incurring the debt. Directors must have reasonable grounds to suspect insolvency. Personal liability for the debts can follow.

Section 588GA provides a safe harbour where, after a director suspects insolvency, they start developing a course of action reasonably likely to lead to a better outcome than immediate administration or liquidation. The director must obtain appropriate advice, keep proper books, and pay employee entitlements.

Generally no — limited liability protects directors from company debts. However, personal liability arises for insolvent trading, unreasonable director-related transactions, personal guarantees, unpaid employee superannuation (director penalty notices), and GST/PAYG withholding obligations.

The ATO issues director penalty notices (DPNs) making directors personally liable for unpaid PAYG withholding, superannuation guarantee charge, and GST. If the company has not reported these liabilities within 3 months of the due date, the penalty becomes a "lockdown" DPN that cannot be remitted.

Civil penalties include pecuniary penalties up to $1.11 million per contravention for individuals, compensation orders, and disqualification from managing corporations. Criminal penalties (for dishonesty offences) include fines and imprisonment up to 5 years.

Yes. ASIC can apply to court for disqualification, and can also disqualify administratively for up to 5 years where the director has been involved in two or more failed companies in 7 years. Court-ordered disqualification can be for up to 20 years or permanently for serious contraventions.

Yes. All statutory duties apply to non-executive directors. While the standard of care may account for the director's specific role and responsibilities, non-executive directors cannot avoid liability by claiming ignorance — they must stay informed about the company's financial position.

A company may indemnify directors against liability to third parties (not the company itself) except for penalties, pecuniary penalties under the Corporations Act, and legal costs in certain unsuccessful defences. D&O insurance is standard but cannot cover wilful breach or criminal conduct.

On appointment, directors must consent in writing, be registered with ASIC (within 28 days), obtain a Director Identification Number (director ID), familiarise themselves with the company's financial position, and understand their duties. Director ID became mandatory from November 2022.

A director ID is a unique 15-digit identifier that every director of an Australian company, registered foreign company, or Aboriginal and Torres Strait Islander corporation must obtain. It is a one-time requirement linked to the individual, not the company. Failure to apply is an offence.

Section 286 requires companies to keep financial records that correctly record and explain transactions and financial position, enable true and fair financial statements to be prepared, and be retained for 7 years. Directors who fail to ensure proper record-keeping contravene section 344(1).

Quillio lets corporate lawyers research director duties across the Corporations Act, ASIC regulatory guides, and case law in minutes — surfacing relevant provisions on care, insolvent trading, safe harbour, and penalty exposure with direct legislative references.