Offences involving officers and directors
A director or officer of a company commits an offence if they are reckless or are intentionally dishonest and fail to exercise their powers and discharge their duties in good faith and in the best interests of a company.
The offence provisions are broadly framed and can capture a wide range of alleged conduct.
Duties and powers of company officers
The Corporations Act 2001 sets out four main duties for directors:
- Care and diligence – this duty requires a director to act with care and diligence to the standard that a reasonable person might be expected to demonstrate.
- Good faith – this duty requires a director to act in good faith in the best interests of the company and for a proper purpose. Company directors are required to avoid conflicts of interest and to reveal and manage conflicts if they arise.
- Not to improperly use position – this duty requires directors not to improperly use their position to gain an advantage for themselves or someone else or to the detriment to the company.
- Not to improperly use information – this duty requires a director not to improperly use the information they gain in the course of their director duties to obtain an advantage for themselves or someone else or to the detriment of the company.
In addition to these director’s duties, there are additional duties and responsibilities pursuant to the Corporations Act 2001 that are imposed on directors of companies:
- Financial compliance – Directors should take reasonable steps to ensure that a company complies with its financial obligations in relation to keeping financial records and financial reporting.
- Insolvent trading – Directors have a duty to ensure that a company does not trade whilst insolvent or where they suspect it might be insolvent;
- Disclosing directors’ interests – Directors should disclose matters relating to the affairs of the company in which he/she has a material personal interest.
- Lodging information with ASIC
- Continuous disclosure – for publicly listed companies, the continuous disclosure of information which is not generally available and which may affect the companies share price must be disclosed.
Consequences for breaching the directors’ duties
While there are a number of civil and administrative penalties which may be imposed on directors who breach their duties, there are also criminal penalties which can be imposed.
There can be severe penalties for failing to comply with duties pursuant to the Corporations Act 2001 or other laws that govern a particular company’s activities. Under the Corporations Act 2001, contraventions of the duty of good faith or improper use of information or position if done so dishonestly or recklessly may be punishable by imprisonment for a maximum period of 5 years. These criminal consequences for directors can be ruinous not only to the business, but also to the director personally.
How can Robertson O’Gorman Solicitors help you?
At Robertson O’Gorman our focus is on advocating for you and protecting you and your business from the consequences of criminal proceedings.
Often, this will be by negotiating with ASIC and other bodies to attempt to avoid criminal prosecution. Our experience as one of Queensland’s oldest criminal practices means that you can trust that we will be in your corner, advocating and fighting for you.