Clifford Chance

A director's primary duty is to act in the best interests of the company. There are numerous specific duties which flow from this fundamental duty at common law and as reflected throughout the Corporations Act 2001 (Cth). Here the most crucial duty is contained in s 588G — to prevent insolvency trading.

Where the company is in financial distress, directors are also required to consider the interests of the creditors of the company (Walker v Wimborne ) and it is particularly in this context and in any eventual liquidation where a director may be pursued for a breach of his or her duties.

Where a director breaches one of his or her duties to the company, the director can be liable:

• where the company has suffered a loss or damage, to compensate the company by way of equitable damages or compensation payable under the Corporations Act 2001 (Cth) s 1317H ;

• where the company has incurred a debt when it is insolvent or where the company becomes insolvent by incurring that debt and at that time there were reasonable grounds for suspecting that the company was insolvent, or would become insolvent, to compensate the company or a creditor: ss 588J and 588M ;

• where the director has gained some benefit, to account to the company for that benefit;

• where the director has improperly acquired some property, to return that property to the company;

• to pay a pecuniary penalty under the Corporations Act 2001 (Cth) of up to A$ 200,000: s 1317G ;

• to disqualification from managing a company under s 206C ; or

• to criminal prosecution: