Accepting a position as a director of a company comes with significant legal obligations and can result in personal liability.

Often a spouse is appointed as a co-director or a sole director for a range of reasons by the other spouse, particularly when it comes to a family business.

There are a range of laws that a director of a company can be personally liable for including the Corporations Act 2001, Competition and Consumer Act 2010, Fair Work Act 2009, not to mention tax, superannuation, environmental and workplace health and safety laws.

What is a Directors duty?

The duty of a director is very broad and includes the obligation to:

• Act in good faith and in the best interests of the company
• Act with reasonable care and diligence
• Not improperly misuse information that comes into their possession due to their role
• Prevent the company from insolvent trading
• Avoid any conflicts of interest
• Keep proper records and complying with reporting conditions pursuant to a range of legislation

A director has to vote in their course of their duties on various matters, and as such a director must understand firstly what they are voting for and importantly how their vote will affect the decision making process and future outcomes of the company.

As a director it is your responsibility to ensure company forms and information is lodged correctly and with the right authority, together with ensuring compliance with laws and regulations relating to the industry the company is operating within.

Another very important obligation is to ensure tax and financial information is completed and lodged again in accordance with relevant legislation and regulations.

Often, a client will tell us that they were only a director on the record but didn’t know what was actually happening. 

That excuse does not absolve you from liability and the courts take a dim view to any person who indicates they were not aware or did not involve themselves in the management of the company. 

It is clearly inconsistent with a person’s duties as a director.

What options are there?

It is often the case a spouse is keen to assist in the family business but really does not envisage having the responsibilities associated with the duties of a director.

If your spouse is basically going to act in an administrative or support based type role consideration should be given to perhaps appointing them as the company secretary of even as an employee. 

This is a much less risker option and would protect them against any possible legal action.

How can FC Lawyers help?

If your spouse asks you to be a director of their company get some legal advice before you agree and ensure that you fully understand your obligations.

The experience Business and Corporate team at FC Lawyers can assist you in understanding your legal obligations. Contact our team today to discuss your legal needs.