Are you a company director? Know your obligations!

Are you a company director? Know your obligations!

I often meet entrepreneurs that want to start up new businesses using a company structure, where they are appointed a director.  When a business owner is advised to set up as a company structure for financial purposes, the issue of director’s duties is often swept to the side.

Additionally, where a person wishes to purchase shares in a company, they may be appointed a director under the Shareholders’ Agreement.

If you are a director of a company or are considering appointment as a director, it is important to remember that you must adhere to certain formalities and obligations – otherwise you might be personally liable!

  1. Signing contracts as a director

We recently posted an article about the difference between signing under an EXECUTION clause vs a SIGNED clause – take a quick look if you need a refresher.

If you want to ensure that your contracts are enforceable, make sure that you sign EXECUTION clauses properly – that is, a single signature of a director may not be sufficient unless you are a sole director and secretary.

A director should not sign the SIGNED clause unless the company’s constitution authorises the director to do so on behalf of the company by resolution – so be wary of any clauses that suggest you are authorised on behalf of the company, otherwise you may be found to have be in breach of the warranty of authority and may be personally liable.

This arises because you are considered to be representing yourself as authorised to sign on behalf of a company as an agent, when in actual fact you are not.

  1. Act in the company’s best interests and in good faith for a proper purpose

If the company suffers losses because you have not acted in its best interests or in good faith for a proper purpose, you may be personally liable for these losses.

  1. Avoid personal conflicts of interest

Where you have a personal interest in a particular matter, for example, if you own a manufacturing company that could supply the company that you are a director in, and you enter into a contract with the manufacturing company for a purchase price significantly above market prices for personal advantage, you could be considered in breach of your director’s duties.

Speak to us for legal advice or assistance

If you would like advice regarding your obligations as a director or your company structure, do not hesitate to contact me at or give me a call on 1300 033 934 for a no-obligation quote.