Statutory duties

The Corporations Act imposes certain duties on directors to act in the best interests of the company and its shareholders.

Directors also may be liable if the company breaches its duties in such diverse areas as insolvency, taxation, corporate reporting, work health and safety and the environment.

The company and its board may have particular statutory duties depending on their area of operation, such as in mining, manufacturing, transport and aged or health care. Government agencies also have their own statutory controls which impose duties on board members.

Work health and safety

Work Health and Safety is an area of the law where directors must, as far as is reasonably practicable, provide and maintain a safe working environment. Failure to use due diligence in this area may make the directors personally responsible for breaches.

Bullying has been identified as a serious risk to health and safety. Companies and their controllers have been exposed to claims where significant damages have been awarded.

In Victoria, criminal charges may be brought against the directors of companies where serious bullying has occurred.

In certain circumstances, sexual harassment may also constitute a risk to the health and safety of an employee.

How can directors avoid personal liability?

Directors must have a broad understanding of the legal environment in which the company operates. The Board must be able to identify potential risks and ensure that there is a strategy in place to deal with those risks.

Vicarious liability

If an employee of the company breaches certain legal duties, the company itself may be vicariously liable. This means the company is liable as if it had committed the act itself. Boards must ensure that proper policies and procedures are in place, and enforced, to reduce the risk that the company is made liable for the unlawful conduct of its employees.