Before You Accept a Director Role, Be Prepared

Director Responsibilities in Australia: How to Protect Yourself Before Appointment | Symmetry Accounting & Tax

Becoming a company director sounds prestigious, but it also comes with significant obligations. In Australia, there are over 700 laws that can make directors personally accountable for a company’s decisions—or lack thereof. That’s why preparation is essential before stepping into the role.

Small vs. Medium and Large Companies

For small businesses, the choice of director is often straightforward—the owner or founder usually takes on the role. Assets are typically tied up with the founder ‘s spouse or family trusts, meaning the owner carries the responsibility.

In contrast, medium-sized enterprises or Australian subsidiaries of international companies face a more complex decision. Appointing directors becomes less about ownership and more about governance and accountability.

By law, every company must have at least one local director to establish a subsidiary in Australia. Larger organisations often add professional managers or non-executive directors, which reinforces the separation between ownership and day-to-day management.

Protecting Yourself as a Director

Since directors can be personally liable for company actions, it’s important to put safeguards in place. Here are some practical steps:

1. Secure an Indemnity Agreement

One of the first protections to seek is a formal indemnity from the company. This agreement ensures the company reimburses you for liabilities incurred while performing your role. However, not all indemnities are automatically valid—some may fail to meet the “benefit to the company” test under the Corporations Act.

Keep in mind that indemnities cannot cover all situations, especially criminal matters or actions taken in bad faith.

2. Access to Company Records

Directors need ongoing access to company information in order to defend themselves if claims arise. This includes board papers and key documents. While the law grants some access rights, broader agreements are often advisable to ensure proper protection.

3. Director & Officer (D&O) Insurance

A D&O insurance policy can help cover legal costs and liabilities. The policy should name you directly (not just the company) to ensure personal coverage. As these policies often contain exclusions, obtaining guidance from an experienced broker is strongly recommended.

4. Consider a Parent Guarantee

If the company is part of a larger group, you may seek an additional indemnity or guarantee from the parent company. This provides extra assurance if the subsidiary becomes insolvent.

Some liabilities can follow directors for years, even after resigning. For that reason, it’s worth negotiating coverage that extends beyond your term.

Why Preparation Matters

Even small businesses are not exempt. If things go wrong, an external administrator or liquidator may step in, and you could still be held accountable. Putting protections in place now—while you’re in control—can save you significant stress later.

At Symmetry Accounting & Tax Pty Ltd, we help clients recognise the financial and compliance risks of directorship. If you are considering becoming a director, we recommend seeking professional advice to ensure you are adequately protected.