- 1Directors' duties apply in small family companies just as they do in large ones.
- 2The business judgment rule can protect honest, informed decisions — but only if the process is documented.
- 3Tax obligations can create personal liability for directors through director penalty notices.
The core statutory duties
- ✓Care and diligence (s 180): act with the degree of care and diligence a reasonable person would in the same role.
- ✓Good faith and proper purpose (s 181): act in the best interests of the company as a whole.
- ✓Use of position (s 182): don't improperly use your position to gain an advantage or cause detriment to the company.
- ✓Use of information (s 183): don't improperly use information obtained as a director.
- ✓Insolvent trading (s 588G): prevent the company incurring debts when there are reasonable grounds to suspect it is insolvent.
The business judgment rule
A director who makes a business judgment in good faith, for a proper purpose, without a material personal interest, having informed themselves appropriately and rationally believing it to be in the company's best interests, is generally taken to have met the duty of care and diligence for that decision.
In practice this rewards good process: board papers, advice obtained, and minutes that record why a decision was made.
Tax and personal exposure
Directors can become personally liable for certain company tax debts — including unpaid PAYG withholding, GST and superannuation guarantee charge — through director penalty notices issued by the Australian Taxation Office. Staying on top of lodgements is one of the simplest ways to reduce personal risk.
Personal guarantees given to lenders, landlords and suppliers are another common source of exposure that should be tracked.
Meeting your duties in practice
Hold regular board meetings, keep proper records and financial statements, declare conflicts of interest, get advice on significant decisions and act quickly if solvency is in doubt. A shareholders' agreement and a clear constitution also help by setting expectations between owners and directors.
Common questions
Do directors' duties apply to a one-person company?+
Yes. A sole director owes the same statutory duties, and is typically the person most exposed to personal liability.
Can I resign to avoid liability?+
Resigning does not remove liability for conduct while you were a director, and in some cases resignation can take effect only when properly notified.
Sources & further reading
- ↗Federal Register of Legislation — Corporations Act 2001 (Cth)
- ↗ASIC — Australian Securities & Investments Commission — guidance for directors
- ↗Australian Taxation Office — director penalty notices
This guide is general information about Queensland and Australian law and is not legal advice. Laws change and every situation is different — speak with us about your specific circumstances before acting.
