Directors warned to stay vigilant in overseeing financial performance – a timely warning in difficult times

Recent events, such as the Queensland Rugby Club going into liquidation and Darrell Lea entering into voluntary administration, have shown that Australian companies are not immune from the fall-out from the difficult global economic environment.

Proper business planning is a vital aspect in maintaining solvency, and the message for directors is to be vigilant in overseeing the financial performance of their companies. It is important to monitor factors that could influence the future success of the business.

The Australian Securities and Investment Commission (ASIC) has developed guidelines for directors of companies facing insolvency.

Directors and officers must be vigilant in exercising their duties. Under the Corporations Act 2001 (Cth), directors and officers have a positive duty not to trade while insolvent and to maintain proper financial records.

Other duties include:

• to act reasonably and diligently, ensuring you are aware of the financial position of the company
• to act in the best interests of the company
• not to use your position as director to gain a benefit for yourself or others
• not to act to the detriment of the company
• not to improperly use information gained through your role for your advantage or to the detriment of the company.

If you have any concerns about what these duties involve, or any other commercial matters, please contact David Grace or Charles Sweeney on +61 7 3231 2444.