Key responsibilities of company directors

When you make a business decision as a company director, you must, amongst other things, ensure that you:

• • make the decision in good faith and for a proper purpose
  • do not have a material personal interest in the decision and make it in the best interests of the company
  • find out and assess how any decision will affect your company’s business performance, especially if it involves a lot of the company’s money or could have a material impact on the company’s reputation
  • keep informed about your company’s financial position and performance, ensuring your company can pay its debts on time
  • get trusted professional advice when you need assistance to make an informed decision
  • make full and frank disclosure about any material personal interests you do have

Management of Company assets, debts, employees, and investments

As a company director it is important you understand that:

• • the company owns the assets so you cannot treat company property, assets or funds, as if they are your own.
  • the company is generally responsible for paying debts incurred by the company, which may include trade creditors, employees and statutory bodies such as the Australian Taxation Office. If there are grounds for suspecting that the company is insolvent, you must not trade, incur debt, or continue to conduct business as usual. Instead, you should immediately seek trusted professional business advice.
  • any money invested in the company (e.g. through loans to the company or by owners or investors buying shares in the company) belongs to the company and must be used for a proper company purpose.
  • the owners or shareholders of the company are entitled to take a dividend payment (e.g. money) from the company, but only after the company has ensured it has the ability to pay its debts owing to trade creditors and other types of creditors who have lent money to the company, employees and statutory authorities.
  • while a company is usually responsible for paying its debts, a director may become personally liable. This generally occurs when a director breaches their legal obligations (e.g. the company continues to trade while it is insolvent).

If your company has employees, you should find out if there are any Pay As You Go (PAYG) withholding or Superannuation Guarantee Charge (SGC) amounts owed to the Australian Taxation Office (ATO) by the company.

If you fail to meet a PAYG withholding or SGC liability by the due date, you may become personally liable for a penalty equal to the unpaid amount under the ATO’s Director Penalty Regime.

Remember, you can reach out to your Halletts adviser anytime if you have questions in relation to being a company director.

More information available at: https://asic.gov.au/for-business/small-business/starting-a-company/small-business-company-directors/