Do You Know Your Director Duties?
Failure to maintain financial records and fulfil Directors duties can lead to financial ruin.
Call Free Expert Advice 24/7Directors Duties Must be Fulfilled
Directors have a number of legal duties that include remaining constantly aware of the financial position of the company and acting in a timely manner to address any solvency issues
The Insolvency Experts can Answer your Questions Regarding:
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Directors’ Legal Requirements
Understanding Directors Duties and Responsibilities
Directors have a legal duty to remain constantly aware of the financial position of the company. The law not only requires a director to maintain proper books and records but to also:
- regularly review the company’s financial situation
- take active steps to question and confirm the financial position and solvency of the company
- seek advice from qualified professionals if a problem is suspected
- act in a timely manner to address any solvency issues.
The law does not consider it sufficient to understand the financial position only once a year when you sign the annual accounts.
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Call FREE Expert Advice 24/7Presumption of Insolvency
If a director fails to maintain or retain financial records for the
7 years required by the Corporations Act, a company will be presumed
to be insolvent throughout the period in which records were not
kept.
This means that if a claim for Insolvent Trading is made, there will be no defence to that action and personal assets may be lost.
Insolvent Trading
Directors also have a duty to prevent a company from trading and
incurring debt while it is insolvent. A company is insolvent if it is
unable to pay its debts as and when they fall due for payment.
If a director incurs new debt at a time when a reasonable person in that position would understand the debt could not be repaid when it was due for payment, a claim for insolvent trading may be made and again, personal assets may be lost.
To avoid this, before any new debt or credit is sought, a director must be sure there are reasonable grounds to believe the company is solvent and able to pay its debts as and when they become due for payment. A director can only do this by reference to the financial records, assuming they have been maintained.
Directors other Duties Under the Corporations Act
All directors must:
- Act with care and diligence
- Act in good faith and for a proper purpose
- Not use their position or information improperly or to gain advantage for themselves or to harm the company
- Act dishonestly or recklessly
Failure by a director to take all reasonable steps to ensure a company fulfils these requirements contravenes the Corporations Act.
We can work with you to help you understand and comply with the regulations.
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We are a specialist insolvency practice providing free 24 hour advice to company directors & individuals throughout all states & territories of australia.
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Established in 2006, we were the original, low cost liquidation provider and have since helped thousands of directors and hundreds of companies in a wide array of industries.
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