Director Duties: What Every WA Business Owner Must Know

If you're a director of an Australian company — even a small family business — the law treats you as a steward of that company, not just an owner. The Corporations Act 2001 (Cth) sets out duties you owe personally, and getting them wrong can mean fines, disqualification, or personal liability for company debts.

Your four core duties

Whatever the size of your company, four duties sit at the centre of the Corporations Act:

• Care and diligence — make informed decisions a reasonable director would make, and keep yourself across the company's financial position.
• Good faith and proper purpose — act in the best interests of the company as a whole, not your own.
• No improper use of position or information — don't use your role, or what you learn through it, to gain an advantage or harm the company.
• Prevent insolvent trading — don't let the company incur debts when it can't pay its existing ones.

Insolvent trading: the one that catches people out

Of all the duties, the duty to prevent insolvent trading is the one that most often exposes directors to personal liability. If your company keeps trading and taking on debt while it is insolvent, you can be ordered to pay those debts personally. The safest response to financial stress is to get advice early — not to trade through and hope.

Practical habits that keep directors safe

Good governance is mostly about boring, consistent habits: holding and minuting board decisions, keeping the company's finances current and visible, declaring conflicts of interest, and documenting the reasons behind significant decisions. If the company's solvency is ever in doubt, written advice and a clear record of the steps you took become your best protection.

This article is general information only and is not legal advice. Laws change and every situation is different — please contact KD Legal for advice tailored to your circumstances.