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Deed of Indemnity for Directors

A Deed of Indemnity for Directors is a legal agreement between a company and a company director or company officer.

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Document Overview

Under the Corporations Act 2001 (Cth), a director is subject to many duties and obligations. If a director breaches one of their duties, this can result in serious legal penalties such as fines and bans. This Deed contains terms of how a company will indemnify a company director. Further, it can also cover the costs incurred by a director or officer while performing their role. You MUST seek advice from a qualified professional before using this deed to check that it meets your specific circumstances.

Why should a company director have a Deed of Access & Indemnity?

Under the Corporations Act 2001 (Cth), a director is subject to many duties and obligations

These include the duty to:

  • Act in good faith and for a proper purpose
  • Act with reasonable care and diligence
  • Prevent insolvent trading
  • Prevent an improper use of position
  • Avoid all misuse of information
  • Prevent conflicts of interest

As a company director, if you breach one of these duties, this can result in serious legal penalties such as fines and bans. Legal costs in such issues as these can escalate rapidly.

If you breach any of the duties, you may also be personally liable for the debts of the company. 

To give an example, you may be personally liable for:

  • Debts incurred by the company when it was insolvent
  • The company is not withholding employees’ pay as you go tax
  • Failure to pay employee superannuation guarantee charges
  • Losses the company suffers as a result of your breach of duty as a director
  • You will be personally liable for any debt you provided a guarantee for as a director

If you are found to be personally liable, you may risk getting a civil penalty, criminal penalty or be investigated by the Australian Securities and Investments Commission (ASIC).

Although there may be an indemnity clause in the company constitution, this may not apply to a director or officer that has left the company. 

However, your company can pay for these costs if you are covered by a Deed of Indemnity. This may vary depending on the scope determined in the agreement you choose to set up. 

Use this Deed of indemnity if:

  • You are a director of a company and want to protect yourself from liability in case challenges arise. 
  • The company wants to explicitly outline their duties and obligations when liabilities arise. 
  • The company wants to proactively incentivise and ensure director’s are not personally liable for breach of duties. 

What does this Deed of indemnity Cover?

  • Indemnity clause
  • Amounts owing to the Director
  • Insurance
  • Rights, powers and remedies

Further Information

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