A person can hold a number of board positions in different companies. Directors will often hold key positions in rival companies. In 2005, three out of every 100 Australian directors held 3 or more director roles at the same time. Therefore, one can be the director of more than one company.
The government has not limited the number of directorships one can hold. However, it can be assumed that directors should only take on as many directorships as they can handle. They must understand their responsibilities and duties to the company. Directors need to understand the amount of work they are taking on. This is especially true for individuals who hold multiple directorships who must balance their duties.
What duties do the directors need to fulfill?
The Corporations Act 2001 (Cth) states that directors possess a duty to exercise their powers and fulfill their duties with:
- Care and diligence,
- The best interests of the corporation in mind, and
- The intention to properly use the information and power that comes with the position.
Holding multiple directorships can give rise to potential conflicts of interest. A conflict of interest is not explicitly defined by Australian law. However, it generally occurs where a director’s personal interests overtakes the interests of the company. Such an instance is where directors use private information about a company in order to gain profit.
Directors must take care not to have a conflict of interest. They should take leave from situations where it may arise or fully disclose this conflict. They can disclose of such by declaring of such at a general meeting, or by notifying their fellow directors.
What happens if a director breaches their duties?
The Corporations Act lists the penalties for when directors breach their duties. The maximum penalty that a court can enforce is $200,000 for each breach of the law. Other penalties include the disqualification of a director, or having to pay compensation for their actions. The criminal penalties includes being sent to jail.
All things considered, a person can be the director of more than one company. However, they must take care to not overburden themselves with the amount of work or breach their duties. A director needs to stay informed about each company, attend the relevant board meetings and efficiently perform their roles.
If you would like further information on breach of directors’ duties, you can refer to our article What Are Directors’ Duties? or contact one of our business lawyers.
