Directors
The role of an individual director is to be an active member of the board and contribute to the board fulfilling its collective role and responsibilities.
Even though board's powers and responsibilities are shared, directors cannot simply rely on the opinions of others or go with the flow. Every director is personally held to account for the actions of the whole board.
Responsibilities of individual directors
The main responsibility of a director is to contribute actively as a member of the board to oversee the governance, performance and compliance of the corporation. Directors need to:
- know what the corporation is doing
- learn how a proposed action will affect the corporation’s business performance – especially if it involves a large amount of the corporation’s money
- get professional advice when it’s needed to help the director make an informed decision
- ask questions of managers and staff through the chair at directors' meetings about how the corporation is going
- take an active part in directors' meetings.
See a list of responsibilities and obligations of directors.
Powers of an individual director
No individual director, including the chairperson, has authority of their own. Authority or powers can only be exercised when the board acts collectively as a group. For example, an individual board member cannot:
- direct the CEO or staff to do anything
- ask the CEO or staff to provide them with any information such as a report or update on an activity, unless the board has requested it.
They can only do these things if they are acting with the authorisation or delegation of a resolution of the board.
Learn more about powers of the board and exercising the board's powers
Legal duties of directors
Being a director comes with a lot of responsibilities including the overall success and legal compliance of the corporation. To ensure directors are acting in the best interests of the corporation and doing their job as effectively as they can, all directors are required to follow a set of legal duties.
There is a fiduciary duty which means the interests of the corporation always have to come first in all your decisions and actions as a director.
There are also 5 duties set out in the CATSI Act:
- of care and diligence
- not to improperly use their position or information
- not to trade while insolvent
- of good faith
- to disclose conflicts of interest.
Learn about the legal duties of directors.
Directors are an officer of the corporation
A director is an officer of the corporation. That means they’re someone who:
- is involved in making decisions that affect the business of the corporation
- can greatly affect the corporation’s financial standing.
Director’s rights
Directors have rights to help them do their jobs effectively. They have the right to:
- get outside professional advice if needed to make an informed decision
- ask questions of managers and staff through the chair at directors' meetings about how the corporation is going
- be given notice of meetings
- take an active part in directors' meetings.
Directors have a common law right to inspect documents of the corporation. They can do this if needed to assess the corporation’s performance.
Keeping director information up to date
There are rules around:
- directors needing to give their corporation their personal details
- keeping records on behalf of the corporation such as each directors' written consent and declaration of eligibility to become a director, and their personal details
- recording decisions about appointing and removing directors
- corporations needing to notify ORIC about changes to the personal details of directors.
Remuneration and expenses
Corporations come in all shapes and sizes. Whether to pay directors for their service is a decision for each corporation to make. Most directors are volunteers, that is they perform their role without payment.
The CATSI Act says that directors are not to be paid remuneration unless a corporation puts in their rule book that directors are to be paid remuneration.
If the directors are to be paid remuneration, the rules must say that directors may be paid provided the remuneration is agreed to by the corporation by resolution in a general meeting. The resolution should cover what remuneration is paid for and how much it will be. For example, a corporation's members may approve a yearly payment to cover all the director's work for the year or a separate payment for each meeting.
Remuneration does not include:
- travel and other expenses related to corporation business. Corporations may reimburse out-of-pocket expenses for coming to meetings or carrying out corporation business.
- payments for goods or services provided by the director under contract to the corporation. However this arrangement will be providing a financial benefit to a related party of the corporation. Providing financial benefits to related parties must be approved by the members.