duty

Director duties

There are numerous and important legal responsibilities imposed on directors of companies under the Corporations Act 2001 and other laws, including the general law.

Of these director duties, some of the most significant are contained in Chapter 2D of the Corporations Act:

  • to exercise the degree of care and diligence that a reasonable person might be expected to show in the role – the business judgment rule (s.180).
  • to act in good faith in the best interests of the company and for a proper purpose (s.181)
  • to not improperly use their position to gain an advantage for themselves or someone else, or to the detriment to the company (s.182)
  • to not improperly use the information they gain in the course of their director duties to gain an advantage for themselves or someone else, or to the detriment to the company (s.183)
  • to lodge information with ASIC (s.188)

but there are others, including to:

  • to avoid conflicts of interest between the interests of the company and their personal interests and to reveal and manage conflicts if they arise (s.191)
  • to take reasonable steps to ensure that a company complies with its obligations in the Corporations Act related to the keeping of financial records and financial reporting (s.344)
  • to ensure that a company does not trade whilst insolvent or where they suspect it might be insolvent (eg, if it is unable to pay its debts as and when they fall due) (s.588G)
  • if the company is being wound up, to assist the liquidator and provide accurate details of the company’s affairs.

Directors can also be liable for unpaid taxation obligations and unpaid superannuation monies – for which the ATO can issue Director Penalty Notices.

Failing to comply with director duties can result in criminal sanctions, fines, disqualification from acting as a director and other consequences, such as breach of contract such as obligations under a Directors & Shareholders Agreement.

People can be responsible as directors even if not formally appointed

What many people don’t know is that the term “director” is defined in section 9 of the Corporations Act to include a person:

  • who is appointed as a director (or alternate director), regardless of the name given to their position; and
  • even though not validly appointed and recorded at ASIC as a director:
    • who acts in the position of a director (also known as a ‘de facto director‘); or
    • whose instructions or wishes the appointed directors are accustomed to act in accordance with (also known as a ‘shadow director’)

Commonly used terms for the titles of ‘director’ include ‘non-executive director‘, ‘executive director‘, ‘managing director‘, ‘independent director‘ and ‘nominee director‘.

Often, businesses give titles to employees rather than pay rises. Similar considerations apply to partnerships, where some partners are ‘salaried partners‘, not ‘equity partners‘ so they take home a salary rather then enjoy the fruits of the business. What these ‘salaried partners‘ (in the same vein as ‘non-executive directors‘) often fail to understand or appreciate is that they are holding themselves out as directors or partners of the business and can have full responsibility as “shadow directors“  if something goes wrong, such as an insolvency.

How to meet the responsibilities

Those with key roles in any business, regardless of its legal form, you should:

  • understand your legal obligations and make compliance with them part of your business
  • keep informed about your business’ financial position and performance, ensuring that it can pay its debts on time and keeps proper financial records
  • give the interests of the business, its stakeholders/owners and its creditors top priority, which includes acting in the business’ best interests (even if this may not be in your own interests)
  • use information you get through your position properly and in the best interests of the business
  • get professional advice or more information if you are in doubt.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to Corporations Act or corporate governance issues or any business or commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Dispute Resolution / General / Insolvency & Bankruptcy / Risk management  by 02 Aug 2018 0 comments

Do you own land in NSW through a family trust structure?

Do you own land in NSW through a family trust structure? If so, then take note…

Revenue NSW (previously the NSW Office of State Revenue) automatically applies the Land Tax Surcharge on land tax assessments for properties owned through a family trust. The surcharge, which was introduced as part of the 2016 NSW budget, is currently at 2%, and can be significant.  There is a similar application to stamp duty also.

This surcharge does not apply where Revenue NSW has been advised of the fact that the trust deed specifically (and irrevocably and permanently) excludes foreign persons or entities as potential beneficiaries.

On 24 June 2020, the State Revenue Legislation Further Amendment Act 2020 (NSW) received Royal Assent. It clarifies that a trustee of a discretionary trust owning residential property in NSW is taken to be a foreign person for foreign surcharges purposes, if the trust does not irrevocably prevent a foreign person from being a beneficiary of the trust.

The transitional provisions give trustees of discretionary trusts an exemption and refund for foreign surcharges where the trust deed, made on or before 24 June 2020, contains a provision to prevent a foreign person from benefiting.

Until 31 December 2020, trustees of discretionary trusts have an opportunity to amend their trust deeds to include the provision and the provision must be irrevocable for the past and future surcharges not to apply.

From 1 January 2021, trustees of all discretionary trusts (including testamentary trusts) will be subject to surcharges unless the trust deed contains an irrevocable provision.

We have assisted several clients to update their trust deeds at the time of initial registration for land tax (to exclude foreign persons or entities as potential beneficiaries) however, where there is an existing trust with an existing landholding, this may be something that needs to be monitored and updated, so check your assessments.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to land tax, trust deed amendments or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your legal needs.

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in General / Property / Tax Planning / Trusts  by 01 Mar 2018 0 comments

How does jury service work?

Jury service plays an important role in our justice system. Juries are used to ensure that legal verdicts are impartial and in line with community standards of behaviour.


The jury system in New South Wales is administered by the Jury Services Branch of the Office of the Sheriff of New South Wales, operating in accordance with the Jury Act 1977 and the Jury Amendment Act 2010.

WHAT DOES A JURY DO?

Juries are used in the District and Supreme Courts of New South Wales to:
  • hear and determine more serious criminal matters
  • hear and determine civil matters involving large monetary claims
  • participate in coronial inquests in the New South Wales Coroner’s Court.

In criminal trials, a jury hears evidence, applies the law as directed by the judge, and decides if a person is guilty or not guilty of a crime, based on the facts. A jury does not participate in the sentencing process.


In most criminal trials, 12 people are selected to be on the jury. Up to 15 jurors can be empanelled if a trial is expected to last longer than 3 months. To be ‘empanelled’ means to be chosen for a specific trial.

Civil trials which require juries are usually defamation proceedings. The trial judge will outline the issues the jury needs to consider to decide who is at fault. A civil trial jury is typically comprised of 4 jurors however, in the Supreme Court, 12 jurors may be ordered.

HOW IS A JURY SELECTED?

There are 3 steps to jury selection:
  1. Inclusion on the jury roll
  2. Receiving a jury summons
  3. Jury selection and empanelling

People who sit as jurors in a particular trial have gone through all 3 steps.

Each year, the names of around 200,000 potential jurors are randomly selected from the New South Wales Electoral Roll (the list of registered voters) and included on a jury roll. Notices of Inclusion are sent out to tell people they are on the jury roll. This is a list of people who could be selected for jury service in the next 12 months.

Approximately 150,000 people on the roll are sent a jury summons notice at some point in the year. This notice requires them to come to court, where they may be selected as a juror for a specific trial.

Out of these, only about 9,000 people a year are selected to serve on jury panels for specific trials. They are then empanelled as jurors.

You can ask to be excused from jury service for various reasons, including the kind of work you do, personal circumstances or because you are away from the state.

There are several categories of people that are excluded from being on a jury (such as lawyers, judges, members of parliament, policemen etc) and others who may be exempted from being on a jury (such as doctors, firemen, members of the clergy, the ill and those who have been on a jury in the last 3 years etc).

DO YOU GET PAID?

If you are selected as a juror, you will get paid an allowance for attending (only if for more than half a day) plus a travel allowance. This is intended to reduce any financial hardship you may incur by serving as a juror, but is not intended to be equal to your normal wage or salary payment – it is effectively a public service obligation on all citizens of New South Wales.

The amount you are paid depends on the length of the trial and whether you are currently employed or not employed. People who are not employed include carers, stay at home parents, retirees and unemployed people.

The present entitlement are:

The travel allowance is calculated on the distance from your postcode to the courthouse and is presently paid at the rate of 30.7c/Km.

Allowances are paid weekly by electronic funds transfers to your nominated bank account. You will be given details to log onto juror.nsw.gov.au and enter your bank account details prior to your court attendance.

WHAT ABOUT EMPLOYERS?

The allowance paid to jurors is not intended to be a substitute for a salary or wage.

Under the Fair Work Act 2009, an employer is required to pay full-time or part-time staff for the first 10 days of jury service.

Employers cannot:
  • force employees to take own leave, such as recreation or sick leave, while doing jury service;
  • dismiss, injure or alter their employees position for doing jury service;
  • ask employees to work on any day that they are serving as jurors; or
  • ask employees to do additional hours or work to make up for time that they missed as a result of jury service.

 

FURTHER INFORMATION
Craig Pryor  is principal solicitor at McKillop Legal. For further information in relation to jury duty or any court/litigation related matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.
in Business / Employment / General / Litigation  by 28 Jul 2017 0 comments