December 11, 2017

Should I allocate director roles to people helping me at my startup?

Should I allocate director roles to people helping me at my startup?

Updated: 8 December 2019

You may have a number of people helping you at your startup. Should you allocate a  director role to all of them?

Short on time? Below is a 33 second summary of the key points.

Below are a few factors you may wish to consider to help you decide.

1. Short term or long term relationship?

If you will only receive short-term assistance, you may want to rethink allocating a director role.

A director is responsible for the ongoing operation of a company they need to be across financials they also need to understand how the business is running day-to-day. 

You should only allocate director roles to people that are happy to take on the responsibilities of a director.

What does the role of a director entail? A director will need to:

  • understand your legal obligations;
  • keep informed about your company’s finances;
  • act in the best interests of the company;
  • get professional assistance if needed;
  • be aware of how your company is operating; and
  • participate in director’s meetings.
Before allocating a director role, you can have your helper consider the factors outlined here. 

2. Exclusive relationship?

In light of the responsibilities of a director listed above, if the prospective director helping you is working on other projects, other business or are employees elsewhere, You should check the following: 

  •  they have sufficient time to fulfill the role of a director;
  •  there is no conflict of interest,  and if a conflict of interest arises that it will be disclosed so you can make a decision about their continued help  as a director at your startup; and 
  • they are not in breach of an employment or any other agreement by taking up the role.

3. Skill set

What sort of skill set do you need your director to have? IT, financial, marketing, legal?  and will the new director’s skills compliment your existing skill set by bringing something new to the table?

4. Officer of your company

You should know that a director is considered an officer holder and because of this they are responsible for the operation of the company.

You can find out more about the role of office holders on the ASIC website here.

From the work you have seen them complete so far, do you think they will be able to perform the duties of an officeholder?

5. Allocating a director role?

If you have decided that you need ongoing assistance from a suitable director, you will need to make sure you have the following from your prospect: 

  • their consent; and 
  • ensure they are 18 or older.

You will need a director consent signed before you register the director. You can download a director consent below for your startup.

Key points

The key points to consider when allocating a director role include:

  • what’s the nature of the relationship with the prospective director? on-going or short term? This will guide your decision to allocate a director role to people helping you at your startup;
  • consider if your prospective director has other responsibilities that may compete; and
  • make sure that the director is 18 years or older and that you have their written consent before you register them as a director.

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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