Board of Directors

Directors are responsible for the overall direction and control of the company.

Directors have the right to delegate the day to day affairs of the company to other officers, ie. the Management.

Directors have the obligation to ensure that the systems and controls within the company are such that the management of the company can be properly monitored and is in conformity with the law and with the systems and procedures prescribed by the Directors.

Directors have a personal duty of care which requires them to exercise the degree of care and diligence that a reasonable person in a similar position in the corporation would exercise in the corporations circumstances.

If Directors fulfil their obligations,  then they have the right to rely on Management to carry out the day to day affairs of the Company.

If Directors act as above then they should be absolved from legal liability.

Management officers are required to act in accordance with the law and with the policies, systems and procedures set down by the Board of Directors.

If Managers act accordingly then responsibility for any damage should be with the Company as a whole.

If Managers, or Directors, do not act as above they should be personally liable for the results of their actions.

Four basic duties of directors
The Corporations Act specifies four main duties for directors:

• To act with all the care and diligence that a reasonable person might be expected to show in the role.  The same duty is imposed on directors at common law.  The business judgment rule provides a "safe harbour" for a director in relation to a claim at common law or subject to s 180 if they reasonably inform themselves about a matter to an appropriate level and make a decision in good faith for the best interests of the corporation and do not have a material interest in the judgment.

• To act in good faith in the best interests of the company and for a proper purpose, including to avoid conflicts of interest, and to reveal and manage conflicts if they arise. This is both a duty of fidelity and trust, known as a ‘fiduciary duty’ imposed by general law and a duty required in legislation.

• To not improperly use their position for personal gain or to the detriment to the company;

• To not improperly use the information they gain in the course of their director duties for personal gain or to the detriment to the company.

Additional Duties and Responsibilities
In addition to the four basic duties, directors have a duty to ensure that a company not trade whilst insolvent or where they suspect it might be insolvent.

Other significant duties and responsibilities for directors include:
• Taking reasonable steps to ensure that a company complies with its obligations in the Corporations Act related to keeping of financial records and financial reporting;

• Disclosing matters relating to the affairs of the company in which he/she has a material personal interest, particularly in the context of the requirement that public companies obtain shareholder approval for related party transactions and, if necessary, obtaining approval for related party transactions;

• Lodging information with ASIC;

• For listed companies, continuous disclosure of information which may affect the company’s share price.

Other legislation imposes responsibilities on directors in addition to the Corporations Act, including approximately 600 pieces of legislation which impose personal liability, some of which has an attached presumption of guilt. There are responsibilities under occupational health and safety and trade practices laws, tax and environmental law. Certain industries may also have specific legislation with which directors must comply.