Drirector Obligations

Like any business, architecture and engineering firms are obliged to adhere to strict rules and guidelines related to the legal obligations of a company. In this article, we cover the main points that you need to be on top of to ensure that your business is operating in line with your legal obligations.

From the moment your company is registered and you have obtained your ACN from ASIC, you must remain completely up-to-date on what your company is doing, and may need external professional advice to understand the fine print and make informed decisions.

Always keep financial records and reports, so you can monitor your company’s monetary position and performance for tax purposes. Keep some financial records electronically (and make regular backup copies of them), but remember you must be able to convert them into hard copy so that you can provide them to anyone entitled to inspect them.

It is only natural that things evolve, but you must keep ASIC informed of changes in your company’s details, such as:

• Change of name (205);

• Change of registered office (form 484);

• Resignation of director or secretary (form 370);

• Change of officeholders or their details (form 484);

• Change of place you keep registers (form 909);

• Change of company review date (form 488),

• Issue of new shares (form 484);

• Negative solvency resolution (form 485);

• And many other changes.

The Corporations Act requires you to tell ASIC about these changes within a certain time period. If you tell them after this time, you may have to pay a late fee.

Personally, this is what the law expects from you:

• Be honest and careful in your dealings at all times.

• Know what your company is doing.

• Take extra care if your company is operating a business because you may be handling other people’s money.

• Make sure that your company keeps proper financial records and can pay its debts on time. Act in the company’s best interests, even if this may not be in your own interests, and even though you may have set up the company just for personal or taxation reasons.

• Avoid using any information you obtain through your position to gain, directly or indirectly, an advantage for yourself or for any other person, or to harm the company; this may be a crime or may expose you to other claims. This information need not be confidential; if you use it the wrong way and dishonestly, it may still be a crime.

As the director of a business, you can become personally liable for decisions made in your capacity managing your business. Therefore, it is critical that you understand all legal obligations imposed on your role.

In order to limit your potential exposure to personal liability, you should obtain proper advice in respect of the primary legislation that applies to the activities of the company and the obligations that are imposed by the legislation on both the business and the directors.

You are unlikely to get in trouble if you are careful in dealing with the business and on its behalf to others. If you ensure that proper procedures exist and are followed in time; keep yourself informed about the financial position; give the interests of the company, its shareholders and its creditors top priority; understand your legal obligations and get professional advice when in doubt.

Please note this article does not cover the whole of the relevant law regarding your obligations as a director of a small business. Obtaining appropriate legal advice is recommended in respect of the matters set out in this publication. More information can be obtained from www.asic.gov.au.