Monday, May 17, 2010

Directors obligations

Lisa Galbraith, CEO

When you register your “Pty Ltd” company with ASIC (as you do with Cleardocs) you trigger more than the beginning of your new enterprise - you trigger obligations to behave and record and report your activities in accordance with the Corporations Act 2001 (Cth).

In an earlier blog Christopher discussed the obligations of a public officer, but what about the key role of director? Even if you appoint an agent to look after affairs of the company you may still have obligations.

What are the Directors personal obligations?

The personal obligations are pretty straight forward –

· you need to act in the company’s best interest and not yours

· you need to act honestly

· you need to know what your company is doing

· you need to make sure that your company can pay its debts

· you must not use information you obtain through your position for your own personal gain.

As a director you (and your fellow directors) control the company’s business. Your company constitution will set out the rules and powers of a director. For example the Cleardocs constitution states in clause 4 “Through the Board, the directors have the power and duty to manage and control the business and affairs of the company.” It is therefore important as a director to personally assess the impact of any decision made by the company. You cannot become a director and expect to do nothing.

Not everyone can be a director

If you are an undischarged bankrupt, subject to a personal insolvency agreement or have been convicted of fraud or other offences you cannot be a director without court consent. If you become any of these things after you are a director you automatically lose your position. The company must notify ASIC of this change.

Company records

As a director it is also important to make sure you keep company records and to keep your records up to date. Examples of the type records you must keep include:

· financial records like the general ledger and the detailed transaction records

· the inventory records

· any agreements or contractual arrangements

· wages and superannuation records

· creditor and purchases records

You should talk to your accountant about which records make sense for your business.

ASIC also need you to keep them up to date with “housekeeping” matters. Appointment or retirement of directors or changes in share holdings or a change in your registered office address are examples of housekeeping matters. You can manage many of these changes online directly using the relevant ASIC form.

Making these types of changes requires a corporate key.

Corporate key

Once your company is registered ASIC automatically sends a corporate key to the registered business address. They do this 2 days after registration. If you lodge forms without the corporate key there will be delays. The corporate key allows you online access to the ASIC database – which is often a more efficient way to keep up to date.

You can read an overview of other things to consider when registering an Australian company here. The overview summarises some of the key requirements and processes for registering and running a company, and flags some key obligations for the company's officeholders. ASIC also provides extensive information here.

You can register an Australian 'Pty Ltd' company through Cleardocs here, you'll need to sign-up with Cleardocs first, or log in.

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