A director may be held personally liable for breaching the Act, with each breach corresponding to a
fine between $300 and $270,000. The highest amounts correspond to offences in relation to the
market, for instance, where a director creates a misleading appearance of active trading. Where a
maximum penalty is not provided for, a person’s may be liable for up to $500.
A director may also be liable for up to 5 years of imprisonment for breach of director duties and for up
to 3 years for offences in relation to winding up.
What about if I am not technically a director?
A person who is not a director may nonetheless be liable. In addition to a person who is validly
appointed as director, a person may be considered a director if he/she acts in the position of a
director and if validly appointed directors are accustomed to act in accordance to the person’s
Do I have a defence?
Directors have a defence against breaches of their duty of care, skill and diligence called the business
judgment defence. Its underlying purpose is to prevent the Court from substituting its own opinion for
the director’ opinion who originally made the decision. The defence only applies to positive business
judgments, at the exclusion of omissions or failures in oversight. The defence operates if the director
fulfils the four requirements to meet the prescribed degree of care, skill and diligence that are outlined
Directors also have a defence for failing to call a general meeting requested by members that hold 5%
of votes within 21 days of members’ request. They must prove that they took all reasonable steps to
cause the other Directors to comply with this obligation.
For other duties, the common law defences apply. As such, fully informed consent of the shareholders
is required to waive liability prior to the breach. Good faith and honesty will not allow a director to
escape liability, even in cases where the breach showed to also benefit the shareholders.
It is no defence to plead ignorance of the law. Nor is it a defence that the director relied on incorrect
advice, unless the director was entitled to rely on that advice.
What other procedural matters do I need to understand as a
Appointment of Directors
Directors are to be appointed at the time a company is registered. Subsequently, an ordinary
resolution at a general meeting of the shareholders is required for the appointment of a director. For
public companies, each appointment requires its own separate resolution.
If expressly authorised by its articles of association, accompany may indemnify a director for acts and
omissions in their capacity as director, for any costs incurred during any proceeding and liabilities to
persons other than the company. A company cannot indemnify a director for any criminal liability
arising from their acts and omissions in their capacity as director.
A director must be a natural person who is at least 18 years of age. An individual will be disqualified
from being a director of a company if they have been disqualified previously or are an undischarged
bankrupt. There is no exclusion against directors being of unsound mind or similar mental or physical
infirmities as is common in other jurisdictions.