Make sure that you are aware of your responsibility as a director
General duties as a director
Under the Corporations Act a director is not only a person who has gone through the formal process to sign on as a director but can also include individuals who act in the role without being formally appointed. What this means is that if you are in a position of authority in a company and you are directing the operation of that company but have not officially become a director then ASIC may well treat you in the same way that it would treat an actual director if the company were to get into difficulties.
So what are your duties if you are an official or deemed director of a company.
- You have a duty to ensure that the business complies with general and specific laws.
- You have a duty of responsibility to the shareholders of the company and to ensure that the company is operated according to their best wishes.
- If the company is at risk of becoming insolvent then you have a duty to the creditors of the company.
- Again, if there is a risk of insolvency then you have a duty of care to the employees.
- There is a duty to ensure that the company keeps appropriate records.
- You have a duty to ensure that the company does not trade while insolvent.
- You have a duty to exercise your powers in a reasonable manner.
So what are the indicators of a company that could be insolvent.
- The company does not have sufficient current assets to cover its current liabilities.
- Unpaid tax or Superannuation liabilities.
- Significant ongoing losses.
- Inability to raise finance from your bank or financial institution.
- Inability to raise finance from shareholders.
- Incomplete financial records.
- Poor cash-flow and lack of cash-flow forecasting.
- Large unrecoverable debts.
What to do if you suspect insolvency
If you think that you may be in a position where you are currently breaching or suspect that you may breach your directors responsibilities in relation to insolvency then you need to get expert advice as soon as possible.
Jamieson Louttit and Associates are expert insolvency advisors who can give you unbiased advice in terms of what your options are, what your next steps should be and how to minimise your liability. Call us today on 02 9231 0505 for a free initial discussion in terms of how we can help you.