For more than 200 years there has been a legal barrier between
the business life of company directors and their personal life.
This was so directors could develop their business without risking
all their personal assets. Without this corporate veil,
entrepreneurial zeal would be constantly under threat.
But for many years this 'corporate veil' has been under
attack to the point where, according to some, it's been reduced
to little more than a tattered rag.
Some of the changes to the law regarding directors of limited
liability companies could land the unwary company director in hot
Tony Mitchell, business law specialist at Stacks/The Law Firm,
outlines some of the legal developments that may impact
Directors can be held personally liable for any unpaid
Superannuation Guarantee Levies of their company.
A Director cannot apply for remission of penalties in respect
of a company's unpaid liabilities to the ATO if three months
has passed from the date the company's liability was due for
A director can be personally liable for PAYG Withholding if a
company reports PAYG Withholding on a Director's wages and that
amount is unpaid by the company.
Directors have a duty to not allow the company to trade when
there are grounds to suspect that it may be insolvent, or likely to
become insolvent. In this context, insolvent means unable to pay
all of its debts as and when they are due for payment.
The duty to exercise a reasonable degree of skill, care and
diligence when performing their responsibilities as a
The duty to make a business judgement in good faith and for a
proper purpose, rationally believing that the judgment is in the
best interests of the company.
*The duty to avoid wherever possible, and disclose to other
directors, any material personal interest that relates to a
decision made for the company.
The duty to ensure that they are appropriately informed about
the subject matter of each decision concerning the affairs of the
company that they are called upon to make.
*The duty to ensure that the company keeps proper financial
records that correctly record and explain the company's
transactions, financial position and performance.
"The continuing deterioration of the corporate veil means
it is more important than ever for company directors to develop and
have in place appropriate strategies to protect their own personal
wealth and their family's personal wealth," Mr Mitchell
Details of the impact of judgments in several recent court cases
brought by ASIC are explained in the most recent Stacks/The Law
Firm wealth protection bulletin at
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
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