Director’s duties and responsibilities
One of the fundamental responsibilities of a company director is to ensure that the company is able to pay its debts when they fall due. If directors allow a company to trade while insolvent, they may be acting illegally and be in breach of civil and criminal provisions of the Corporations Act 2001.
When can directors become personally liable for the company’s debts?
- If the company suffers losses caused by the director’s breach of their duties
- If the company has employees and does not meet its PAYG withholding and Superannuation Guarantee Charge (SGC) obligations
- If a company director uses their home to guarantee a company loan
- If a company director creates a new company to continue the business of an existing company that has been deliberately wound up or closed down to avoid paying outstanding debts, including taxes, creditors, and employee entitlements (illegal phoenix activity).
Consequences of failing to perform director duties
- Criminal offence with a penalty of up to $200,000 or imprisonment for up to five years, or both
- A director may be personally liable to reimburse the company or others for any loss or damage they suffer
- A director may be banned from managing a company
Follow the link below for more information regarding the key responsibilities of company directors
https://asic.gov.au/for-business/small-business/starting-a-company/small-business-company-directors/