Director Duties in Australia 2026: The Complete Guide for Directors, Founders and Company Officers

## What Are Director Duties in Australia?

Every director of an Australian company owes statutory and fiduciary duties under the *Corporations Act 2001* (Cth). Failing to meet those duties can result in civil penalties up to $1,820,000 per contravention, criminal prosecution, and personal liability for company debts.

These duties are not aspirational guidelines. They are enforceable obligations, pursued by ASIC, liquidators, and aggrieved companies and shareholders. ASIC secured a record $830 million in civil penalties in 2025–26, and director conduct was at the centre of a significant portion of that enforcement activity.

If you are a director, founder, company officer, or company secretary of an Australian company, whether a small proprietary company or a large public company, this guide sets out what you must know. It covers the seven core statutory duties, the business judgment rule, personal liability for company debts, insolvent trading, Director ID obligations, WHS duties, and what to do if you are facing an allegation of breach.

This is the complete guide. It is structured as a reference document, use the section headings to navigate directly to the area you need.

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The Seven Core Statutory Duties Under the Corporations Act

The *Corporations Act 2001* (Cth) sets out a number of duties that apply to directors and, in some cases, other officers. The most important of these are found in ss 180–184 and ss 588G and 191–195.

### Section 180, Duty of Care and Diligence

A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation’s circumstances and occupied the same office and had the same responsibilities as the director or officer: s 180(1).

The standard is objective. The question is not whether this particular director was trying their best, it is whether a reasonable person in that position would have done what the director did.

What this duty requires in practice:

– Attending board meetings and engaging with the business
– Reading and understanding financial statements
– Making informed decisions, not rubber-stamping management recommendations
– Understanding the company’s financial position at all times
– Seeking expert advice on matters beyond your expertise
– Monitoring management and asking hard questions

A director who signs off on financial statements without reading them, or who approves a transaction without understanding the risks, will struggle to establish they met the s 180 standard.

The business judgment rule (s 180(2)) provides a defence in limited circumstances, see the dedicated section below.

### Section 181, Duty of Good Faith (Bona Fide and Proper Purpose)

A director or other officer must exercise their powers and discharge their duties in good faith in the best interests of the corporation, and for a proper purpose: s 181(1).

There are two separate limbs to this duty:

1. Bona fide (good faith): The director must genuinely believe they are acting in the interests of the corporation. This is a subjective test, did this director honestly believe their decision served the company?

2. Proper purpose: The director must use their powers for the purpose for which they were conferred. Using a power to issue shares primarily to dilute a competitor’s shareholding (rather than to raise capital) would breach the proper purpose limb even if the director believed it was commercially wise.

A breach of s 181 is also a criminal offence under s 184 if the director acts dishonestly.

### Section 182, Improper Use of Position

A director, other officer, or employee must not improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation: s 182(1).

This section catches:

– A director who steers a business opportunity away from the company to a competing business in which the director holds an interest
– A director who enters the company into transactions on terms favourable to themselves at the company’s expense
– An executive who uses their position to obtain personal benefits, commissions, kickbacks, or off-market deals, that should have flowed to the company

Importantly, s 182 applies to employees as well as directors and officers. It is one of the few duties in this part of the *Corporations Act* that extends beyond the board room.

### Section 183, Improper Use of Information

A director, other officer, or employee who obtains information because of their position must not improperly use that information to gain an advantage for themselves or someone else, or to cause detriment to the corporation: s 183(1).

A critical feature of s 183 is that it survives resignation. A former director who uses confidential information obtained during their tenure, customer lists, pricing data, strategic plans, after they have left the company can still breach s 183.

This section often arises in director disputes where a departing director establishes a competing business. The combination of s 183 (improper use of information) and the general law of confidence creates significant personal exposure for directors who walk out the door with company information.

### Section 184, Criminal Liability

Section 184 is the criminal counterpart to ss 181, 182, and 183. A director or other officer is criminally liable if they:

– Are reckless or intentionally dishonest in failing to exercise their powers and discharge their duties in good faith in the best interests of the corporation (s 184(1))
– Use their position dishonestly to gain an advantage or cause detriment (s 184(2))
– Use information dishonestly to gain an advantage or cause detriment (s 184(3))

The maximum penalty for an individual convicted under s 184 is 15 years imprisonment, 4,500 penalty units ($1,638,000 at the current rate), or three times the benefit obtained, or both imprisonment and the financial penalty.

Criminal prosecution under s 184 is pursued by the Commonwealth Director of Public Prosecutions (CDPP), not ASIC directly, though ASIC refers matters to the CDPP for prosecution.

### Sections 191–195, Material Personal Interest Disclosure

Directors must disclose any material personal interest they have in a matter that relates to the affairs of the company: s 191(1). Disclosure must be made at a directors’ meeting as soon as practicable after the director becomes aware of the interest: s 191(1).

A director who has a material personal interest in a matter being considered by the board must not vote on the matter or be present while it is being considered, unless an exception applies: s 195(1). Exceptions include where the interest does not need to be disclosed (e.g. the company is a proprietary company and the other directors have agreed) or where ASIC grants relief.

Failing to disclose a material personal interest is a civil penalty provision. In practice, conflict of interest failures regularly appear in ASIC enforcement actions and commercial disputes between co-directors.

### Section 588G, Insolvent Trading (Civil and Criminal)

Section 588G is covered in detail in the dedicated section below. In summary:

– A director must prevent the company from incurring a debt when the company is insolvent, or when incurring the debt will make the company insolvent: s 588G(1)
– The director must have been a director at the time the debt was incurred
– At the time the debt was incurred, there must have been reasonable grounds for suspecting insolvency
– Civil liability attaches where the director failed to prevent the debt: s 588G(2)
– Criminal liability attaches where the failure was dishonest: s 588G(3)

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The Business Judgment Rule

The business judgment rule (s 180(2)) provides a complete defence to a claim that a director breached the duty of care and diligence under s 180(1). It is one of the most important, and most misunderstood, protections available to directors.

The rule only applies to the duty of care. It does not protect a director against claims of bad faith, dishonesty, or a breach of s 181, 182, or 183.

### The Four-Limb Test

To establish the business judgment rule defence, a director must show that they:

1. Made a business judgment, the rule applies to decisions, not omissions. A director who failed to act cannot rely on the rule.
2. Made the judgment in good faith for a proper purpose, the decision must have been made honestly and for the benefit of the corporation.
3. Did not have a material personal interest in the subject matter, a director with a conflict of interest in the transaction cannot rely on the business judgment rule for that decision.
4. Informed themselves about the subject matter to the extent they reasonably believed to be appropriate, a director who made a decision without any inquiry will not satisfy this limb.
5. Rationally believed the judgment was in the best interests of the corporation, the belief need not be correct, but it must be rational. A belief that no reasonable person would hold cannot satisfy this limb.

### When the Business Judgment Rule Protects Directors

The rule is designed to protect directors who take calculated business risks that do not work out. If a board made an informed decision to enter a new market, obtained financial and commercial advice, weighed the risks, and the venture failed, that is the kind of decision the rule protects.

The rule exists because sound commercial law recognises that effective corporate governance requires directors to be able to take risks. If directors faced personal liability every time a business decision turned out poorly, commercial risk-taking would be paralysed.

### When the Business Judgment Rule Does Not Apply

The rule does not protect a director who:

– Made no active decision, the board simply allowed a situation to develop without making a choice
– Had a personal financial interest in the outcome of the decision
– Made no inquiry before acting
– Held a belief that the decision was in the company’s interests that no rational person could have held
– Was acting dishonestly, recklessly, or for a purpose other than the company’s interests

*ASIC v Rich* [2009] NSWSC 1229 is frequently cited as a landmark case examining the s 180 duty of care in the context of the collapse of ONE.TEL Limited. The case provides important guidance on the standards courts apply when assessing whether directors met the s 180 duty. No findings or penalty amounts from that case are extracted here, its significance lies in the detailed judicial analysis of what active and informed board governance looks like and when it falls short.

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Directors’ Duties vs Officers’ Duties

The duties in ss 180–184 apply to “directors” and “officers”, and the definition of who qualifies is broader than many people assume.

### Who Is an “Officer” Under Section 9?

Under s 9 of the *Corporations Act*, an “officer” of a corporation includes:

– A director or secretary
– A person who makes, or participates in making, decisions that affect the whole or a substantial part of the business of the corporation
– A person who has the capacity to affect significantly the corporation’s financial standing
– A person in accordance with whose instructions or wishes the directors are accustomed to act

This last category, often called a shadow director, is particularly significant.

### Shadow Directors

A shadow director is a person who is not formally appointed as a director but whose instructions or wishes the directors are accustomed to follow. Common examples include:

– A major shareholder who informally gives direction to the board
– A former director who retains control over management decisions without re-appointment
– A secured creditor or financier who has taken a level of operational control over the company

If a person is found to be a shadow director, they owe the same statutory duties as a formally appointed director, including the obligation to prevent insolvent trading under s 588G.

### De Facto Directors

A de facto director is a person who acts as a director without having been formally appointed. This can arise where a company fails to complete appointment formalities, or where a person assumes a director-level role without the paperwork following. Courts assess whether the person acted in the role, regardless of their formal title.

### Company Secretaries

Company secretaries are “officers” under s 9 and owe the duties in ss 180–183. However, the scope of those duties in practice depends on the nature of the secretary’s responsibilities. A company secretary with operational authority will be held to a higher standard than a purely administrative secretary.

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WHS Duties for Directors and Officers

The *Corporations Act* is not the only legislation that imposes personal duties on directors. If your company has workers, you also owe duties under work health and safety legislation, and those duties apply personally, independent of the corporate structure.

### The Officer Due Diligence Duty

Under s 27 of the *Work Health and Safety Act 2011* (Cth), and the equivalent provision in the *Work Health and Safety Act 2011* (Qld), an officer of a person conducting a business or undertaking (PCBU) must exercise due diligence to ensure the PCBU complies with its work health and safety duties.

Due diligence under s 27 requires an officer to:

– Acquire and keep up to date knowledge of work health and safety matters
– Understand the nature of the PCBU’s operations and the associated hazards and risks
– Ensure the PCBU has, and uses, appropriate resources and processes to eliminate or minimise risks
– Ensure the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards, and risks
– Ensure the PCBU has, and implements, processes for complying with any duty or obligation under the WHS Act

The term “officer” under the WHS Act has a similar meaning to the *Corporations Act* definition, it captures directors, CEOs, and others with significant influence over the business.

### Personal Liability Under the WHS Act

A failure to comply with the s 27 officer duty is a Category 2 offence (failing to comply with a health and safety duty), carrying a maximum penalty of $170,000 for an individual. Where the failure is reckless (Category 1), the maximum penalty rises to $340,000 for an individual. These are personal penalties, not corporate penalties, and the corporate veil does not protect a director against WHS prosecution.

WHS regulators in Queensland (Workplace Health and Safety Queensland) pursue officers independently from any corporate prosecution. The WHS duties sit alongside, and are entirely separate from, the duties under the *Corporations Act*.

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Financial Records Obligations

Directors have direct statutory responsibility for the company’s financial records. Ignorance of the company’s books is not a shield, it is evidence of a failure to meet the duty of care.

### Section 286, Seven-Year Record-Keeping

A company must keep written financial records that correctly record and explain its transactions, financial position, and performance: s 286(1). Financial records must be retained for 7 years after the transactions covered by the records are completed: s 286(2).

“Financial records” includes:

– Invoices, receipts, orders for payment, bills of exchange, cheques, promissory notes, and vouchers
– Documents of prime entry (journals, day books, purchase and sales ledgers)
– Working papers and other documents necessary to explain the methods by which financial statements are made up

### Section 288, Financial Records in English

Financial records must be kept in English, or in a form that can readily be accessed and converted into English: s 288.

### Section 344, Criminal Liability for False or Misleading Financial Records

A person who authorises or permits a contravention of s 286 or s 288 commits an offence under s 344. Where the financial records are used to prepare financial reports, ASIC has pursued directors and CFOs for authorising or permitting the preparation of financial reports that do not comply with the *Corporations Act*.

ASIC’s enforcement in the area of financial reporting compliance has intensified significantly in recent years. For an analysis of ASIC’s financial reporting crackdown and what it means for Queensland directors, see our post on ASIC’s record $830 million enforcement year.

Practical obligations for directors:

– Review financial statements before signing off, do not simply trust management
– Ensure the company’s books are maintained by a competent bookkeeper or accountant
– Retain records for the full 7-year period, even after the company has ceased trading
– Understand that financial records that cannot support solvency analysis are a major risk factor in insolvent trading claims

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Director ID Obligations

Since November 2021, directors of Australian companies have been required to obtain a Director Identification Number (Director ID). The Director ID regime is now fully enforced, and ASIC’s disqualification powers have been extended to cover Director ID non-compliance.

### The Obligation to Apply (Section 1272B)

A person who is, or intends to be, a director of a company must apply for a Director ID: s 1272B(1). The obligation to apply arises:

– Before a person becomes a director, if they have not already held a directorship requiring a Director ID
– Within 28 days of appointment if transitional provisions applied

### The Director ID Number (Section 1272C)

Once issued, a Director ID is a unique identifier assigned to a director by the Australian Business Registry Services (ABRS). The Director ID must be used consistently, it follows the director across all their directorships for life.

### New Disqualification Powers Under Section 206FA

Following the *Treasury Laws Amendment Act 2026* (Act No. 57, 2026), ASIC can now apply to a court for an order disqualifying a person from managing corporations where that person has failed to comply with their Director ID obligations under s 1272B.

Section 206FA creates a direct pathway from Director ID non-compliance to disqualification, without the need to establish a separate breach of director duties. For Queensland directors who have not yet obtained a Director ID, or who are uncertain about their compliance status, this is a significant new risk.

For a detailed analysis of the Director ID disqualification regime and ASIC’s enforcement record, see our post on ASIC’s director disqualification and DIN compliance in Queensland.

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Insolvent Trading: The Most Dangerous Duty

For directors of companies under financial pressure, s 588G of the *Corporations Act* is the provision that causes more personal liability than any other.

### How Section 588G Works

Section 588G imposes personal liability on a director when:

1. The company incurs a debt
2. At the time the debt is incurred, the company is insolvent, or becomes insolvent because of the debt
3. At that time, there are reasonable grounds for suspecting the company is insolvent or would become insolvent
4. The person is a director of the company at that time
5. The person fails to prevent the company from incurring the debt

The concept of “incurring a debt” is broader than borrowing money. It includes entering a contract under which a payment obligation arises, receiving goods on credit, incurring a liability under a guarantee, and accruing tax obligations.

### What Is Insolvency?

A company is insolvent when it cannot pay all its debts as and when they become due and payable: s 95A. This is the cash-flow test. Insolvency is not about net asset position, a company with significant property assets can be insolvent if it cannot meet its liabilities as they fall due.

Indicators courts have used to assess insolvency include:

– Inability to meet commitments to creditors
– Unpaid statutory obligations (PAYG withholding, superannuation)
– Repeated requests for extensions of time to pay
– Failure to obtain further finance on reasonable terms
– Post-dated cheques or deferred payment arrangements
– Cash flow projections showing inability to meet future obligations

### Reasonable Grounds to Suspect Insolvency

The s 588G liability is engaged where there are “reasonable grounds for suspecting” insolvency, not where insolvency is certain. A director who ignores warning signs and continues to incur obligations on behalf of the company faces personal liability for every debt incurred during that period.

For a detailed guide to insolvent trading obligations and the specific warning signs that courts have treated as establishing reasonable grounds for suspicion, see our post: Insolvent Trading Advice for Queensland Directors.

### The Safe Harbour Defence (Section 588GA)

Section 588GA provides a complete defence to an insolvent trading claim where a director takes a course of action that is reasonably likely to lead to a better outcome for the company and its creditors than the immediate appointment of an administrator or liquidator.

The safe harbour requires all four of the following conditions to be met:

1. The director starts developing a plan, the director must be taking a course of action reasonably likely to lead to a better outcome. This is a positive requirement, it is not enough to simply hope things improve.
2. Financial records are up to date, the company’s financial records must be maintained in accordance with s 286. A director cannot access the safe harbour if the company’s books are not in order.
3. Employee entitlements are being paid, employee entitlements (wages, superannuation, leave entitlements) must be paid as and when they fall due.
4. The advice or plan is being pursued, the course of action must be genuinely and actively pursued, not abandoned or left dormant.

The safe harbour is not a shield against insolvent trading during a period of passive inaction, it is a protection for directors who are actively working to rescue the company.

### ASIC Disqualification Statistics

ASIC’s enforcement data shows that insolvent trading is consistently one of the leading causes of director disqualification in Australia. ASIC disqualified 36 directors in the 2025–26 year, a figure that includes directors disqualified for insolvent trading, failure to prevent company losses, and related conduct. For the detailed ASIC enforcement picture, see our post on ASIC’s record enforcement year.

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Consequences of Breaching Director Duties

The consequences of a breach of director duties in Australia are serious and, in some cases, career-ending. The enforcement regime operates across multiple tracks, civil penalties, criminal prosecution, disqualification, and personal liability.

### Civil Penalties (Section 1317G)

Where a court finds that a person has contravened a civil penalty provision of the *Corporations Act*, it may order the person to pay a pecuniary penalty: s 1317G.

For an individual, the maximum civil penalty is the greater of:

– 5,000 penalty units, at the current penalty unit rate of $364 (applicable to offences on or after 1 July 2026), this is $1,820,000, and
– Three times the benefit obtained by the person in connection with the contravention

The 5,000 penalty unit maximum applies to the most serious civil penalty provisions, including ss 180, 181, 182, 183, 191, and 588G.

### Criminal Liability (Sections 184 and 1311)

Where a director’s conduct involves dishonesty or recklessness, criminal sanctions are available:

– Section 184, maximum 15 years imprisonment, 4,500 penalty units, or three times the benefit obtained (for the most serious criminal director duties offences)
– Section 1311, the general criminal penalty provision for offences against the *Corporations Act*

Criminal prosecution is reserved for the most serious cases, those involving deliberate dishonesty, large-scale fraud, or repeat offending. However, ASIC’s referrals to the CDPP have increased in recent years as enforcement philosophy has shifted toward greater personal accountability.

### Disqualification from Managing Corporations (Sections 206C and 206E)

A court may order that a person be disqualified from managing corporations: s 206C. Disqualification means the person cannot be a director of any company, must not participate in the management of any company, and must not act as a liquidator, provisional liquidator, or administrator.

ASIC also has the power to disqualify a person administratively (without going to court) under s 206F where the person has been an officer of two or more companies that have been wound up within a seven-year period and ASIC is satisfied that the manner in which the company was managed contributed to the winding up.

Disqualification periods typically range from 2 to 5 years for administrative disqualifications, and can be much longer for court-ordered disqualifications in serious cases.

### Personal Liability for Company Debts

In addition to civil penalties and criminal liability, a director who breaches s 588G may be made personally liable to pay the amount of the company’s debts:

– Section 588M, allows a creditor whose debt was incurred in contravention of s 588G to recover that debt from the director personally
– Section 588W, allows a liquidator to recover an amount equal to the loss suffered by creditors as a result of the director’s contravention

For directors of small proprietary companies, this is often the most significant practical consequence of insolvent trading, the director’s personal assets (home, savings, superannuation to the extent permissible) become exposed to the claims of the company’s creditors.

For a comprehensive guide to the full range of mechanisms by which a director can be made personally liable for company debts, see our post on Director Personal Liability in Australia.

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## What to Do If You Are Facing a Breach Allegation

If you receive a letter from ASIC, a notice from a liquidator, or a claim from a creditor or co-director alleging a breach of director duties, the steps you take in the early days matter significantly. Here is what to do:

1. Preserve all documents immediately.
Do not delete emails, destroy records, or remove documents from company systems. Evidence of document destruction is treated as consciousness of guilt and significantly worsens your position. Secure your personal communications, board minutes, financial records, and any correspondence relevant to the matter.

2. Understand the nature of the claim.
Is this an ASIC investigation or formal examination? A liquidator’s demand under s 588M or 588W? A co-director or shareholder dispute? A WHS investigation? Each of these has different procedural rules, timelines, and available defences. Understanding what you are facing is the first step to responding appropriately.

3. Identify the available defences.
The available defences depend on the claim. For a duty of care claim (s 180), the business judgment rule may apply. For an insolvent trading claim (s 588G), the safe harbour (s 588GA), the honest and reasonable belief defence (s 588H), and the lack of participation defence may all be available. For good faith and proper purpose claims (s 181), the analysis is more subjective, but evidence of genuine belief and consistent conduct matters.

4. Engage experienced lawyer legal counsel urgently.
Director duty disputes, ASIC investigations, and insolvent trading claims are experienced areas of commercial law. The procedural steps, compulsory examination, voluntary administration, safe harbour documentation, require urgent and informed advice. Do not engage general practice solicitors for matters of this complexity.

5. Do not ignore ASIC correspondence.
Failing to respond to ASIC correspondence or compulsory examination notices is itself a criminal offence. ASIC has broad investigative powers, including the power to compulsorily examine directors under oath (ss 19 and 597 of the *Corporations Act*). If you receive a notice from ASIC, respond, through your legal adviser, within the required time.

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How Boss Lawyers Helps Directors

Boss Lawyers acts for directors, founders, and company officers in the full range of director duty disputes, ASIC investigations, and insolvent trading proceedings. Mark Harley has more than 17 years of experience in commercial litigation and insolvency, acting for directors in matters at every level of the court hierarchy.

Director disputes, whether you are a majority director defending a breach claim or a minority director seeking to enforce your rights, Boss Lawyers acts in disputes between co-directors, shareholder-director conflicts, and board control disputes. See our Director Disputes service page for more.

ASIC investigations and enforceable undertakings, if ASIC has commenced an investigation or issued a compulsory examination notice, you need experienced lawyer representation. Boss Lawyers advises directors on their rights and obligations in ASIC investigations, responses to infringement notices, and negotiation of enforceable undertakings.

Insolvent trading defence, if a liquidator has made a claim under s 588M or 588W, Boss Lawyers analyses the available defences, reconstructs the company’s financial history, and builds the case for the safe harbour or other available protections. See our Insolvency Lawyers Brisbane service page.

Shareholder disputes, where a director duty breach arises in the context of a shareholder dispute, Boss Lawyers can pursue or defend the director duty claim alongside the broader dispute. See our Director Disputes page for the full range of disputes we handle.

Brisbane-based, nationally capable, Boss Lawyers is based at Brisbane CBD, 32 Turbot Street, Brisbane. We act for directors across Queensland and nationally in matters before the Federal Court and Supreme Courts.

Contact us on 1300 267 711 or via bosslawyers.com.au/contact/.

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Frequently Asked Questions

### What are the main director duties in Australia?

The main director duties in Australia are set out in the *Corporations Act 2001* (Cth). They include the duty of care and diligence (s 180), the duty of good faith and proper purpose (s 181), the prohibition on improper use of position (s 182), the prohibition on improper use of information (s 183), criminal liability for dishonest conduct (s 184), the obligation to disclose material personal interests (ss 191–195), and the duty to prevent insolvent trading (s 588G). Directors also owe personal duties as officers under work health and safety legislation.

### What is the maximum penalty for breaching director duties in Australia?

The maximum civil penalty for an individual director who breaches a civil penalty provision of the *Corporations Act* is the greater of 5,000 penalty units or three times the benefit obtained. At the current penalty unit rate of $364 (applicable to offences from 1 July 2026), 5,000 penalty units equals $1,820,000. For criminal contraventions under s 184, the maximum penalty is 15 years imprisonment, 4,500 penalty units ($1,638,000), or three times the benefit obtained.

### Does the business judgment rule protect all director decisions?

No. The business judgment rule (s 180(2) of the *Corporations Act*) only applies to the duty of care and diligence. It does not protect directors against claims of bad faith, dishonesty, improper use of position or information, or insolvent trading. To rely on the rule, a director must show they made an informed decision, in good faith, without a material personal interest, and rationally believed the decision was in the company’s best interests.

### Can a director be personally liable for company debts in Australia?

Yes. Under s 588M of the *Corporations Act*, a creditor can recover debts incurred in contravention of the insolvent trading provisions directly from the director personally. Under s 588W, a liquidator can recover an amount equal to the loss suffered by creditors from the director. Other mechanisms include director penalty notices (ATO), personal guarantee enforcement, and accessorial liability provisions. The corporate veil does not protect a director who has breached their statutory duties.

### What is the safe harbour defence for insolvent trading?

The safe harbour defence under s 588GA provides a complete defence to an insolvent trading claim where a director is taking a course of action reasonably likely to lead to a better outcome for the company and its creditors than the immediate appointment of an administrator or liquidator. The four conditions, active restructuring plan, financial records maintained, employee entitlements paid, and the plan genuinely pursued, must all be met. Passive inaction does not qualify.

### Do director duties apply to shadow directors and de facto directors?

Yes. Shadow directors, persons whose instructions the formally appointed directors are accustomed to follow, and de facto directors, persons who act as directors without formal appointment, owe the same statutory duties under the *Corporations Act* as formally appointed directors, including the duty to prevent insolvent trading under s 588G. The label does not matter; the conduct does.

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*This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances. Mark Harley, Principal Solicitor, Boss Lawyers Pty Ltd.*