Have you ever wondered what the difference between Company Officeholders and Directors are in Australia? If you’ve been confused, you’re not alone as these roles have some similarities. However, there are a few key differences that are crucial to know as they determine your rights and duties in the company.
The two roles are significant for Australian Companies, and all companies are required to have a minimum number of company officeholders and directors.
Officeholders have responsibility for the day-to-day operations of the company. Directors have the responsibility for overseeing the management and running of the company.
However, all company directors are also officeholders. This means that a director of a company’s duties include all the duties company officeholders have.
Read along to find out the difference between Company Officeholders and Directors and what their duties are in a Company.
Who Are Company Officeholders?
A company officeholder (company officer) is an individual who’s responsible for running a company on a daily basis. To become a company officeholder, you must be at least 18 years of age.
Company officeholders typically include people who are able to make decisions either affecting the entire company or a significant part of it. They also include people who can significantly affect the financial standing of the company. Company officeholders can include the following:
- Company directors
- Company secretaries
- Chief Execetuive Officer (CEO)
- Chief Operating Officer(COO)
- Chief Financial Officer(CFO)
- Senior staff
- Receivers
- Administrators
- Liquidators
- Trustees
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Officeholder Duties
The main duty officeholders have is to ensure that the company is being operated effectively. Additional duties can be provided through a company’s by-laws.
The Corporations Act 2001 outlines the general duties and responsibilities company officeholders have in a company. These duties include:
- Acting with due care and diligence
- Acting in good faith and for the best interests of the company
- Ensuring company details are kept up to date
- Making sure company records such as financial records, members registers and deeds are accurate and kept properly
These apply to all officeholders regardless of whether they’re included in the by-laws. A company’s by-laws can set out the specific duties and obligations of each company officeholder. These are the rules which govern how a company is to be run.
The Australian Securities and Investments Commission(ASIC) also provides the following duties for officeholders:
- Passing solvency resolutions
- Notify ASIC when their company has changed locations, including its registered office
- Informing ASIC when the share structure of their company has changed
- If an officeholder leaves their company, they must let ASIC know
- Contrastingly they must also let ASIC know when a new officeholder joins their company. If they fail to let ASIC know of the changes within 28 days, late fees will apply
The different types of officeholders and their duties include the following:
President(CEO)
The President or the CEO of a company is responsible for:
- Signing major contracts
- Approving business arrangements
- Approving stock offerings
- Approving other legal documents
Vice President
The Vice-President of a company supports the President when it’s required. However, not all companies have a Vice-President.
Treasurer(CFO)
The Treasurer or CFO is responsible for:
- Tracking cash flow
- Financial planning or forecasting
- Analysing the company’s financial strengths and weaknesses
- Proposing corrective financial solutions
- Managing the finance and accounting divisions
- Ensuring that the company’s financial statements and reports are accurate and completed on time
Chief Operating Officer (‘COO’)
The COO is responsible for:
- Managing the corporation’s day-to-day affairs
- Ensuring compliance with general and specific laws applying to the company’s operations
- Reporting directly to the CEO
- Not all companies have a COO. If this is the case, the company secretary performs these duties instead
Secretary(Company Secretary)
The Secretary is responsible for:
- Maintaining and making sure the company keeps corporation’s records, documents, and “minutes” from shareholder meetings
- To notify the ASIC of share issues and changes to company and directors’ details
Who Are Company Directors?
A company director is an individual who’s responsible for overseeing the company and managing its business activities. All companies are required to have at least one director.
According to Section 201A of the Corporations Act 2001, proprietary companies are required to have one director, whereas public companies must have at least three directors(excluding alternate directors).
To become a director, there are two requirements that must be met.
- You must be at least 18 years old
- You must consent to take on the role and responsibilities of a director
- Your consent must be signed and provided prior to being appointed as a director
- Your company must retain the written consent and notify ASIC whenever the company undergoes a significant change, such as the appointment of a new director
- The document to be signed is known as the “Consent to Act as a Director” document
This document states the duties directors have, and therefore companies ensure directors are aware of their duties after they sign this document
Director Duties
The main duty company directors have is to oversee and manage their company’s business activities. Directors owe their primary obligations to the company’s shareholders (members). Therefore they must act in their best interests when managing the company.
The duties of directors can be provided by a company’s by-laws or company constitution. However, legal obligations that are imposed on all company directors are contained in the Corporations Act, these duties include :
- Primary duties to Shareholders
- To not act in conflict with the interests of shareholders
- Pay dividends to shareholders
- Report the company’s performance to shareholders
- The duty to prevent the company from trading during insolvency.
- This duty requires directors to be properly informed about the company’s financial position
- Directors must also consider whether there are reasonable grounds to suspect a company is insolvent or will become insolvent as a result of incurring new debts
- The duty to not improperly use information obtained through your position as a director to gain an advantage for yourself or someone else or cause detriment to the company
- The duty to exercise your powers and duties in good faith in the best interests of the company and for a proper purpose
- This means not putting your personal interests ahead of the company’s
As a director, if you fail to comply with the duties outlined above, there will be a contravention of the Corporations Act.
Other common duties include:
- Governing the organisation by establishing its mission, policies and objectives
- Ensure compliance with general and specific laws applying to the company’s operations
- Selecting, appointing, supporting and reviewing officers
- Approving annual budgets
- Seeking legal advice when it’s required before making a decision
- Ensuring that your company’s Australian Business Number (ABN) and Australian Company Number (ACN) are contained within all your company’s documents
Duties you owe ASIC as a company director
- You must check your company’s annual statement, which is provided by ASIC yearly. Checking the annual statement requires you to
- Ensure your company’s details are updated
- To avoid late fees, ensure payment of your annual review fee
- Within two months of the annual review date, you must pass the solvency resolution
- You must notify ASIC within 14 days if your company name has changed
- You must notify ASIC if you are choosing to resign or retire from being a company director
- You must tell ASIC when an officeholder’s details have changed
Companies will often implement a Deed of Indemnity for their directors in order to ensure the costs associated with performing their role are covered and to ensure directors are protected from personal liability.
Key Takeaways
Now you should know the key differences between the roles of Australian company directors and officeholders and their respective duties.
These are crucial to know as each role has different duties attached to them. Furthermore, there can be significant penalties for company directors and officeholders who do not uphold their duties.
If you’re still feeling unsure about what your role and duties are as a company officeholder or company director, you can always hire a lawyer for professional advice.
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