What does it mean to be a company director ? we'll take you through what should know about the key duties before you accept a director position.
A company is operated by directors and secretaries. Both have obligations under Australian legislation.
Limited liability, the ability to allocate shares to investors and a favourable tax regime are all perks of the company structure.
So what does it take to be a director at a startup? Below are some insights to guide you.
You can be a director if you are at least 18 years old and consent to being a director before you are appointed as a director. Seems like a pretty low threshold right?
In addition, to set up a proprietary company, at least one director needs to ordinarily reside in Australia.
In addition to the above requirements, you have legal responsibilities.
You should know that there is no such thing as a silent director that exists only on ASIC paper work and because of this, you need to be aware of whats required.
Regardless of whether you are a sole director at a company or one of many, you are legally responsible for how the company is run.
Directors and company secretaries have responsibilities per the Corporations Act, the most noteworthy include:
to act in good faith and in the best interests of the company; and
to exercise care and diligence; and
to avoid conflicts of interest between the company and your personal interests; and
to prevent the company from trading while insolvent (unable to pay debts when due); and
to assist a liquidator if the company is wound up.
In addition to these general legal responsibilities, there are specific director responsibilities outlined below.
Responsibilities are inevitable with your director role. We’ve broken down those responsibilities into 3 categories: (a) general (b) administrative and also (c) company operations.
Especially relevant, key general director duties include:
be honest and careful in your dealings at all times; and
know what your company is doing; and
As a director, you are also responsible for administrative duties to keep ASIC records up to date. The most noteworthy include:
your current registered address; and
personal details of directors - name, date of birth and current residential address; and
company financial records; and
notifying ASIC of certain changes including - registered office, directors, principal place of business; and
paying fees to ASIC - for example, the annual renewal fee.
Also, you may be interested to know we have templates to help you meet your administrative duties, simply click the button below to view our special package.
In addition, you are responsible for company operations including to:
make sure that your company can pay its debts on time; and
see that your company keeps proper financial records; and
act in the company’s best interests, even if this may not be in your own interests; and
use any information you get through your position properly and in the best interests of the company.
If you are in doubt, gather more information before accepting a director position and get your own independent advice.
Finally, you should only agree to be a director if you can carry out the duties, no matter what anyone tells you, being a director will never be just a title, you will have responsibilities that cannot be pardoned by ASIC.