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Director delegations in Australia

Updated: 7 December 2019

At some point, as a director, you may decide to delegate duties to someone else. 

Now, directors are able to delegate duties because of section 198D of the Corporations Act 2001. 

In fact, directors may delegate any of their powers to: 

  • a committee of directors;
  • a director;
  • an employee of the company; or 
  • any other person. 

And they'll need to record those director delegations in the company minute book. 

Section 251A of the Corporations Act has all the details of what should be kept in a company’s minute book, if you'd like to learn more. We won't go through those details in this article.

So, as a director, can you rely on information or advice from others?

Information or advice from others

Director's may have employees, a professional advisor or expert or another director giving them information and advice about the company.

So, can directors rely on that information or advice?

Yes.

And, the courts will assume it was reasonable for a director to rely on that information or advice, unless the contrary is proved. 

The reliance has to have been made in good faith and the director cannot have carelessly accepted it on face value.

Rather, the director must have made an independent assessment of the information or advice using their knowledge of the company, structure and operations: section 189 Corporations Act 2001. 

And the director won’t be responsible for the the actions of the delegate if these above conditions are met. 

So, why does all of this matter?

Well, if as a director, you receive bad information or advice, you'll want to prove that your reliance was reasonable and that you should not be held responsible.

Final thoughts

Finally, be sure to complete your due diligence and delegate your director powers carefully. 

And, always ask questions about your delegates competencies.

I wish you success in your ventures!


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Vivian Michael
 

Vivian Michael is a lawyer and founder of Michael Law Group. Vivian's mission is to deliver the best quality business legal services to entrepreneurs launching an Australian business, wherever they are in the globe.

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