Every director of an Australian company has the same core statutory duties. You must act with reasonable care and diligence (s180), act in good faith in the company's best interests and for a proper purpose (s181), not misuse your position or company information (ss182 and 183), and disclose material personal interests (s191). These come from the Corporations Act 2001, apply wherever the director lives, and sit on top of the duties to prevent insolvent trading and keep proper records. A director appointed to meet the residency rule carries the full set.
Who owes the duties
Part 2D.1 of the Act imposes the general duties on "a director or other officer of a corporation". In the current compilation, "director" is defined in section 9AC. Many older articles still cite s9. The definition covers anyone validly appointed, whatever their title, plus people who act as a director or whose instructions the board is accustomed to follow. "Officer" (s9AD) is wider again and includes people who make decisions affecting a substantial part of the business.
Two practical consequences for foreign-owned companies:
- A resident director appointed to satisfy s201A owes exactly the same duties as the founder who owns the shares.
- An overseas executive who runs the subsidiary without being appointed can still owe them. That's covered in shadow directors and parent control.
The duties, one by one
| Section | Duty | Consequence of breach |
|---|---|---|
| s180(1) | Care and diligence of a reasonable person in the company's circumstances and holding your office | Civil penalty provision |
| s181 | Good faith in the company's best interests, and for a proper purpose | Civil penalty; s184(1) offence if reckless or dishonest |
| s182 | Don't improperly use your position to gain an advantage or cause detriment | Civil penalty; s184(2) offence if dishonest |
| s183 | Don't improperly use company information. The duty continues after you leave | Civil penalty; s184(3) offence if dishonest |
| s191 | Notify the other directors of a material personal interest | Offence (strict liability as to the interest) |
| s286 | Keep financial records that explain the company's transactions and position | Linked to insolvency presumptions |
| s588G | Prevent the company incurring debts while insolvent | See insolvent trading |
Section 185 confirms that these statutory duties are additional to the general-law (fiduciary and common-law) duties, not a replacement for them.
Care and diligence in practice
ASIC's guidance for directors turns s180 into concrete habits. Review financial information regularly, ask questions when something is unclear, act on warning signs, and understand obligations outside the Corporations Act, such as tax, employment and work health and safety. ASIC also says you cannot delegate responsibility for understanding the company's affairs, even when accountants or advisers do the work.
For a director based in Australia while the business is run from Toronto or Munich, that means a regular information flow. Board papers before meetings, monthly management accounts and sight of tax lodgements are the minimum a reasonable director in that position would insist on.
The business judgment rule
Section 180(2) treats a director as meeting the care-and-diligence duty for a business judgment if they:
- make it in good faith for a proper purpose
- have no material personal interest in it
- inform themselves to the extent they reasonably believe appropriate
- rationally believe it is in the company's best interests.
A belief is rational unless no reasonable person in your position would hold it. The rule covers s180 and its general-law equivalents only. RG 217 confirms it does not apply to insolvent trading.
Good faith when the company is under pressure
ASIC's guidance stresses that the company is a separate legal entity even when one person owns it, and that the company's interests can include its creditors and employees, especially when money is tight. Related-party arrangements need to be justifiable on arm's-length terms. Write a short note of the reasons for key decisions. In a later dispute, a one-paragraph file note made at the time is worth more than any after-the-event explanation.
Three provisions boards overlook
Section 188: no secretary means directors carry the filings. A proprietary company doesn't have to appoint a company secretary. But if it has none, each director contravenes s188(2) when the company breaches a listed "corporate responsibility provision". The list includes keeping a registered office (s142), notifying changes to the principal place of business (s146), notifying member register and share structure changes (ss178A, 178C), lodging officeholder notices (s205B), responding to the annual statement (s346C) and notifying a change of ultimate holding company (s349A). The defence is showing you took reasonable steps to make sure the company complied.
Section 189: relying on advice. Reliance on information from employees, professional advisers, other directors or a board committee is presumed reasonable only if it was in good faith and after an independent assessment of the information, having regard to your own knowledge of the company. Forwarding the group CFO's numbers without reading them doesn't qualify.
Section 190: delegation. If the board delegates a power under s198D, each director stays responsible for how the delegate uses it, unless the director reasonably believed throughout that the delegate would act properly. For subsidiaries that delegate day-to-day management to a group executive, this is the provision that links the local director to decisions made offshore.
How management power is split
Under the replaceable rule in s198A, the business of a company is managed by or under the direction of the directors. Because it is a replaceable rule, a constitution can change it, so check yours. Owners act through shareholder resolutions and by appointing or removing directors. They don't act by instructing the board on individual transactions. If your group wants a wholly owned subsidiary's directors to act in the parent's interests, s187 allows it, but only under strict conditions. Our parent control guide explains them.
Where the money risk sits
The statutory duties are the legal frame, but most personal financial exposure for directors of foreign-owned companies comes from two places:
- Tax: unpaid PAYG withholding, GST and super can become personal through a director penalty notice.
- Insolvency: s588G compensation claims by liquidators, with pecuniary penalties of up to 5,000 penalty units (or three times the benefit) for serious contraventions, as set out in RG 217.
A company can indemnify and insure its directors, but the Act limits what can be covered. That's why a deed of access, indemnity and insurance plus D&O cover is standard for any professional non-executive. It isn't an optional extra.
What this means for choosing a resident director
A resident director who takes these duties seriously will ask for information, ask questions and occasionally say no. That isn't obstruction. It's what keeps their signature, and your company's filings, defensible. Under our engagement, the director signs routine matters within a written decision protocol and escalates borrowing, guarantees, related-party deals and solvency questions. Our nominee director guide explains why "name only" arrangements don't work in Australia. When you're ready, the eligibility checker confirms whether you need a resident director at all.
General information as at 27 October 2026, not legal advice. Have your lawyer apply these duties to your own board and constitution.
Frequently asked questions
Do Australian director duties apply if I live in another country?
Yes. The duties in ss180 to 184 attach to anyone who is a director or officer of the Australian company. Nothing in them depends on where the director lives, and an overseas director is judged against the same reasonable-person standard as a local one.
Can a resident director be appointed just to satisfy s201A and do nothing else?
No. Australian law doesn't have a passive or figurehead category of director. A director who doesn't engage with the company's affairs is exposed under s180, and non-participation also weakens tax and insolvency defences.
Does the business judgment rule protect every decision?
Only decisions that meet its four conditions, and only for the duty of care in s180 and its general-law equivalents. It doesn't protect against breaches of good faith, conflicts or insolvent trading.
Who enforces these duties?
ASIC can bring civil penalty or criminal proceedings and seek a banning order. A liquidator can also sue a director for compensation on the company's behalf after an insolvency.
Official sources
- Corporations Act 2001 (Cth), compilation in force (Federal Register of Legislation) legislation.gov.au
- ASIC: Managing your director obligations asic.gov.au
- ASIC RG 217 Duty to prevent insolvent trading asic.gov.au
Checked against these sources on . Fees, thresholds and forms change: confirm with the source before you lodge.
General information about Australian law and practice, not legal or tax advice for your circumstances. Check the official sources, or ask your adviser, before you act.