The 6 Director’s Duties Every Company Director Must Master (And What To Do If You Haven’t)

Being a company director isn’t just about guiding strategy or signing off on budgets. It carries serious legal duties and personal risks under the Corporations Act 2001 (Cth). Yet, far too many directors unintentionally step into breaches every year simply because they’re unaware of what’s expected of them.

Let’s break down the six key duties every director must know, the risks of non-compliance, and practical steps you can take right now to reduce your risk.

 1. The Duty to Act in Good Faith

Directors must act in the best interests of the company and not themselves, shareholders, or creditors.

Risk of non-compliance may result in personal liability for decisions made in bad faith and/or compensatory damages or disqualification.

What can you do now? Review any transactions or decisions that could appear self-serving. If they exist, seek immediate advice and document your decision-making process clearly.

2. The Duty to Exercise Care and Diligence

You’re expected to make informed, rational decisions, not to “rubber stamp” management proposals.

The Risks are ASIC action, disqualification, or liability for losses.

What can you do now? Adopt a structured decision-making process. Ask questions, demand data, and minute deliberations properly.

3. The Duty to Avoid Conflicts of Interest

Personal interests must never clash with company interests.

The Risks are civil penalties, reputational damage, and shareholder action.

What can you do now? Maintain a register of interests and disclose potential conflicts early.

4. The Duty Not to Improperly Use Information or Position

Information gained as a director must not be exploited for personal gain or to harm the company.

The Risks are fines, imprisonment (in serious cases), and trust erosion.

What can you do now? Review your use of company information, even informal discussions through a legal lens.

5. The Duty to Prevent Insolvent Trading

This is the big one. Directors must stop trading if the company can’t pay its debts when due.

The Risks are Personal financial liability for company debts, ASIC prosecution, and potential bankruptcy.

What can you do now? Regularly monitor cash flow and solvency indicators. If you’re uncertain, seek immediate advice rather than waiting for the next board meeting.

6. The Duty of Compliance

You must ensure the company meets its statutory and reporting obligations (such as tax, employment law, and corporate reporting).

The Risks are civil penalties, regulatory scrutiny, and director disqualification.

What can you do now? Set up a compliance calendar and audit existing processes.

The Bottom Line

Most directors don’t intentionally breach their duties. They simply don’t know where the red lines are until it’s too late.

At Northbridge Legal, we help directors understand their obligations, build robust governance frameworks, and act early to stay compliant.

And if you’ve already spotted red flags or simply want confidence that your board is protected, speak with us today.

Back your business. Protect yourself. Lead with confidence.