Section 181 of CA 2001 sets out that directors must act in good faith, in the best interests of the company and for a proper purpose.Resolving to enter a company into a risky transaction without the prospect of producing benefit or an MD failing to inform the board of key matters which ought to have been brought to the board’s attention would both constitute breaches. This duty is emphasised is cases related to the approval of financial statements ( Centro) and board approval of statements issued by a company ( James Hardie).Section 180 of CA 2001 sets out how directors must act with a reasonable degree of care and diligence.

Directors Duty of Care – Part 2D.1 of Corporations Act 2001 (Cth) “CA 2001” This is especially important given the relaxation of insolvent trading laws by the Government due to the COVID19 crisis ( where directors can trade whilst insolvent and avoid personal liability to September 2020).

There are, however, some fundamentals that you need to be aware of in the effective discharge of your duties as a director. It may be that you have decided to join a NFP board, or the title is bestowed upon you by the CEO following an appraisal, you have been made a board member’s ‘deputy’, or simply you have set out on your own as the sole director and shareholder of a newly incorporated company. Being a ‘director’ is an esteemed title which may project an image of leadership, influence, responsibility, authority and affluence. The Business Judgement Rule is poorly understood and underutilised.

Business judgment rule