Strong corporate governance is an important component of a company. Directors who understand their statutory duties make fewer costly mistakes. Companies must comply with the proper governance documents to ensure they meet the standards required under the Corporations Act 2001 (Cth). There can be various instances where things go wrong, such as, a shareholder dispute, an ASIC investigation or an insolvent trading allegation. Companies must be aware of their responsibilities to avoid ending up in a compromising position. Further, directors and officers of a company must understand their duties and responsibilities to avoid any breaches that could result in personal liability.
Citilawyers advises private companies, family businesses, SMEs, not-for-profits, and their directors and shareholders on corporate governance across Sydney and New South Wales. We help boards establish proper governance frameworks, advise directors on their statutory and fiduciary duties, and act in governance disputes when prevention has failed.
If you have a corporate governance issue, board concern, or director liability question, contact our lawyers.
Contact our Sydney corporate governance lawyers if any of the following apply:
Corporate governance issues are usually significantly cheaper to prevent than to litigate. Early advice almost always produces better outcomes: both legally and commercially.
The primary statutory framework for corporate governance in Australia is the Corporations Act 2001 (Cth). Key provisions include:
Relate to the general duties that apply to a director or an officer of the corporation and impose civil penalties, including to:
Duty to prevent insolvent trading.
Conflicts of interest and related party transactions.
Oppression remedies for shareholders.
Meetings, resolutions, and notices.
Civil penalty provisions.
Criminal offences for breaches resulting from reckless or dishonest:
Compliance with these provisions is overseen primarily by the Australian Securities and Investments Commission (ASIC). Listed companies are also subject to ASX Listing Rules and the ASX Corporate Governance Principles and Recommendations. Not-for-profits and charities are regulated by the Australian Charities and Not-for-profits Commission (ACNC).
Corporate governance is not just about ticking compliance boxes. The Corporations Act imposes personal liability on directors and officers for many breaches that can result in civil penalties, criminal prosecution, disqualification, and personal liability for company debts in insolvent trading cases. The stakes are high.
For broader corporate work, including business structures and transactions, see our corporate lawyers Sydney page. For a detailed analysis of directors’ duties specifically, see our article on directors’ duties.
The four core statutory duties under the Corporations Act 2001 (Cth) are:
Section 180: Duty of Care and Diligence
Directors and officers must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were in their position at a corporation in the company’s circumstances, occupying the same office. The duty is judged objectively, what a reasonable director or officer would do, not what this particular person thought they should do. Director duties also apply to de facto and shadow directors, not just formally appointed directors. See our guide to de facto directors for more on when informal directors attract personal liability.
The business judgment rule in section 180(2) provides a defence: a director’s or officer’s decision is taken to be made with appropriate care and diligence where they:
Section 181: Good Faith and Proper Purpose
Directors and officers must act in good faith in the best interests of the company and for a proper purpose. This duty is broad: it captures decisions taken for personal reasons, decisions that benefit a controlling shareholder at the expense of minority shareholders, and decisions taken in conflict with the company’s interests.
Section 182: Improper Use of Position
A director, secretary or officer must not improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation.
Section 183: Improper Use of Information
A person who obtains information because they are, or have been, a director, officer, or employee must not improperly use that information to gain an advantage for themselves or someone else, or to cause detriment to the corporation. This duty extends beyond resignation.
Section 184: Criminal Offences
Where a breach of duty is dishonest, intentional, or reckless, it can become a criminal offence carrying penalties of up to 15 years imprisonment and substantial fines.
For matters involving directors facing potential or actual liability, our corporate law team and our Sydney litigation lawyers act in defence and prosecution of director duty claims.
Section 588G of the Corporations Act 2001 (Cth) imposes a duty on directors to prevent the company from incurring debts when it is, or becomes, insolvent. Breach exposes the director to:
The duty arises where a director:
A safe harbour from breach of section 588G(2) is available under section 588GA for directors who genuinely attempt to develop a course of action reasonably likely to lead to a better outcome, but the safe harbour requires immediate engagement with an appropriately qualified entity and is technical to apply correctly.
If you are a director and the company is showing signs of financial distress, urgent advice is essential. Continuing to trade while insolvent is one of the paths to personal liability and director disqualification in Australian corporate law.
For matters involving company insolvency more broadly, see our insolvency and bankruptcy page.
Directors face conflicts of interest in countless ways, through directorships of related entities, family connections, supplier relationships, and personal financial interests. The Corporations Act 2001 (Cth) imposes specific obligations:
Section 191: A director who has a material personal interest in a matter being considered at a directors’ meeting must give notice of the nature and extent of the interest.
Section 195: A director with a material personal interest in a matter must not be present while the matter is considered or must not vote on the matter (subject to exceptions including disclosure-and-approval procedures and limited directors).
Section 208: A public company must obtain shareholder approval before giving a financial benefit to a related party. This is a significant compliance burden requiring formal notice procedures and shareholder approval. A breach of this provision where the involvement was dishonest can result in criminal liability.
Proper governance frameworks include conflict declaration registers, related party transaction policies, and structured board agenda processes that surface conflicts before they become problems. We help boards establish these frameworks and respond when conflicts arise unexpectedly.
Where shareholders are oppressed by the conduct of the company’s affairs, section 232 of the Corporations Act provides a powerful remedy where the court can make an order. The court may make any order it considers appropriate where the conduct of the company’s affairs:
Common grounds for oppression claims include:
For comprehensive guidance on oppression claims, share buy-outs, and shareholder remedies in NSW courts, see our shareholder disputes lawyers page. Remedies under section 233 can include compulsory buy-out at fair value, winding up of the company, regulation of conduct, and damages. Oppression matters are generally heard in the Supreme Court of New South Wales and the Federal Court of Australia.
For broader shareholder disputes, see our article on shareholders’ agreements.
For private companies, family businesses, and SMEs, proper governance documents are crucial, and they save enormous costs later. We assist boards in establishing:
Constitutional documents:
Board governance documents:
Risk and compliance documents:
The right document set depends on the size, complexity, and risk profile of the company. We tailor documents to the company’s actual situation rather than providing generic templates.
The Corporations Act imposes detailed requirements on meetings of directors and shareholders. Common compliance issues include:
Defective compliance with meeting requirements can invalidate decisions: including approval of accounts, election of directors, and other binding resolutions. Where meeting procedures have not been properly followed, we advise on the consequences and on rectification options including court applications under section 1322 of the Corporations Act.
ASIC has the power to commence an investigation and send a notice to a company or director to require an examination. Common ASIC actions made under the Australian Securities and Investment Commission Act 2001 (Cth) include:
ASIC investigations are technical, time-pressured and high-stakes. We act for directors and officers responding to ASIC notices, including assessing the scope of obligations, claiming privilege where available, and preparing for examination.
For broader civil and criminal proceedings, see our litigation lawyers Sydney and criminal defence lawyers Sydney pages.
Not-for-profits and registered charities operate under a layered governance framework:
Charitable boards face distinct challenges, including:
We act for not-for-profit boards on governance frameworks tailored to the sector and on the particular regulatory obligations facing charities.
Directors often need legal advice in their personal capacity, separate from the company’s lawyers. Common scenarios include:
In these cases, we act for the director personally and provide advice independent of the company’s interests. Where conflicts of interest exist between the director and the company, having separate legal representation is essential.
Our Sydney corporate governance lawyers act for companies, directors, shareholders, and not-for-profit boards throughout Sydney and across New South Wales, as well as businesses operating from NSW into national and international markets.
We act on governance matters across proprietary limited companies, public companies, family businesses, joint ventures, partnerships, and not-for-profit corporations. Where matters proceed to court, we appear in the Supreme Court of New South Wales, the Federal Court of Australia, and before ASIC.
If you have a corporate governance issue, director liability concern, or need to establish proper governance frameworks for your company, contact Citilawyers today. Early advice prevents the vast majority of governance problems and significantly reduces personal exposure for directors.