Corporations Act. Australia
Directors liable for debts and other obligations incurred by corporation as trustee
(1) A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation:
(a) has not discharged, and cannot discharge, the liability or that part of it; and
(b) is not entitled to be fully indemnified against the liability out of trust assets solely because of one or more of the following:
(i) a breach of trust by the corporation;
(ii) the corporation’s acting outside the scope of its powers as trustee;
(iii) a term of the trust denying, or limiting, the corporation’s right to be indemnified against the liability.
The person is liable both individually and jointly with the corporation and anyone else who is liable under this subsection.
Note: The person will not be liable under this subsection merely because there are insufficient trust assets out of which the corporation can be indemnified.
(2) The person is not liable under subsection (1) if the person would be entitled to have been fully indemnified by 1 of the other directors against the liability had all the directors of the corporation been trustees when the liability was incurred.
(3) This section does not apply to a liability incurred outside Australia by a foreign company.
(4) This section does not apply to a liability incurred by a registrable Australian body outside its place of origin.
(5) This section does not apply to a corporation that is an Aboriginal and Torres Strait Islander corporation.
Note: Section 271‑1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 deals with the liability of directors of Aboriginal and Torres Strait Islander corporations for debts and other liabilities incurred by those corporations as trustee.
Division 4 — Powers
198A Powers of directors (replaceable rule — see section 135)
(1) The business of a company is to be managed by or under the direction of the directors.
Note: See section 198E for special rules about the powers of directors who are the single director/shareholder of proprietary companies.
(2) The directors may exercise all the powers of the company except any powers that this Act or the company’s constitution (if any) requires the company to exercise in general meeting.
Note: For example, the directors may issue shares, borrow money and issue debentures.
198B Negotiable instruments (replaceable rule — see section 135)
(1) Any 2 directors of a company that has 2 or more directors, or the director of a proprietary company that has only 1 director, may sign, draw, accept, endorse or otherwise execute a negotiable instrument.
(2) The directors may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.
198C Managing director (replaceable rule — see section 135)
(1) The directors of a company may confer on a managing director any of the powers that the directors can exercise.
(2) The directors may revoke or vary a conferral of powers on the managing director.
198D Delegation
(1) Unless the company’s constitution provides otherwise, the directors of a company may delegate any of their powers to:
(a) a committee of directors; or
(b) a director; or
(c) an employee of the company; or
(d) any other person.
Note: The delegation must be recorded in the company’s minute book (see section 251A).
(2) The delegate must exercise the powers delegated in accordance with any directions of the directors.
(3) The exercise of the power by the delegate is as effective as if the directors had exercised it.
198E Single director/shareholder proprietary companies
Powers of director
(1) The director of a proprietary company who is its only director and only shareholder may exercise all the powers of the company except any powers that this Act or the company’s constitution (if any) requires the company to exercise in general meeting. The business of the company is to be managed by or under the direction of the director.
Note: For example, the director may issue shares, borrow money and issue debentures.
Negotiable instruments
(2) The director of a proprietary company who is its only director and only shareholder may sign, draw, accept, endorse or otherwise execute a negotiable instrument. The director may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.
198F Right of access to company books
Right while director
(1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding:
(a) to which the person is a party; or
(b) that the person proposes in good faith to bring; or
(c) that the person has reason to believe will be brought against them.
Note: Section 290 gives the director a right of access to financial records.
Right during 7 years after ceasing to be director
(2) A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding:
(a) to which the person is a party; or
(b) that the person proposes in good faith to bring; or
(c) that the person has reason to believe will be brought against them.
This right continues for 7 years after the person ceased to be a director of the company.
Right to take copies
(3) A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings.
Company not to refuse access
(4) A company must allow a person to exercise their rights to inspect or take copies of the books under this section.
Interaction with other rules
(5) This section does not limit any right of access to company books that a person has apart from this section.
Part 2D.2 — Restrictions on indemnities, insurance and termination payments
Division 1 — Indemnities and insurance for officers and auditors
199A Indemnification and exemption of officer or auditor
Exemptions not allowed
(1) A company or a related body corporate must not exempt a person (whether directly or through an interposed entity) from a liability to the company incurred as an officer or auditor of the company.
When indemnity for liability (other than for legal costs)