Directors Duties According To The Corporations Act Of 2001

As a director of company, you will have lots of functions and responsibilities to your company. The Corporations Act of 2001 further clarifies and establishes the general duties and responsibilities of the directors assign to the company. This is also applicable to the board members.

The general duties can be summarized as:

The director has to decide for the right purpose and with proper faith

To act with necessary care and diligence

To stay away from misuse of information

The director should not abuse the use of power that comes with his position

To divulge interest of the company

To prevent conflict of interests

In the directors duty decide for the right purpose and with proper faith, the director should not be biased in making decision. Since the directors are tasked to make many decisions, he should not decide just for the betterment of certain people or for his personal interests but rather, for the betterment of the company itself. The best interest of the company should be the top priority of the director. The secretaries, other officers and employees of the companies should also abide by this rule. Intended recklessness and dishonesty of the director or of any officer or employee of the company will be considered a criminal offence.

Under the 180th section of the Corporations Act of 2001, the directors, secretaries and other employees should be able to exercise his or her duties with reasonable care and diligence. He or she should show an interest in the companys welfare and take note of any irregularities in the company that might cause any problems. To be able to act or decide properly and with care and diligence, the directors, or any employees in the matter, should obtain correct information and get information from honest and credible sources.

Information gathered from the company should also be used properly and not for personal gains or the downfall of a specific person or of the company. A criminal offence is committed once confidential information is used improperly by the directors or employees.

Improper exercise of power that comes with your position to gain personal interest or cause problem for a co-employee or the company as a whole is illegal and very unethical. Disclosure of confidential information of the director to any third party is also prohibited. Using your power for a wrong and improper reason is also a criminal offence according to the Corporations act of 2001.

When a company is to enter a contract and one director finds that he or she can have a personal gain from the contract, the director must immediately inform the other directors the extent and nature of his involvement/ or gain in the said contract during a meeting. The meeting should be scheduled immediately if possible.

If the directors interest becomes in conflict with those of the company, the director should not try to influence the other directors. The director should not attend meetings if the source of conflict of will be discussed in the meeting.

In the Corporations Act of 2001, the duties are discussed further and in details. The penalties are also more specific.