Director’s Duties

No matter the size of your company, if you are a director of a company, you have a number of duties and responsibilities to both the company and the public. These duties are primarily imposed by the Corporations Act 2001 (Commonwealth). In addition to their duties under the Corporations Act, directors have a number of other duties set out in various other legislation as well as the common law.

It is important to understand and comply with these duties. The failure to comply with these duties may result in directors being personally responsible for any loss caused by the breach of these duties, or even criminal prosecution by the Australian Securities and Investment Commission (ASIC).

The most significant duties of directors are:

To act in the best interest of the company

A director must act in the best interests of a company and to its shareholders as a whole, ahead of their own personal interest. This can get confusing especially in a situation where the directors and the shareholders are one and the same – a common scenario in small businesses. It is important to remember that the company is considered a separate legal entity, has its own interests, and these interests may not be the same as the director’s interests.

To act with care and diligence

A director must perform their duties with the same care and diligence that a reasonable person would have should they be in the director’s shoes.

To act in good faith

A director must perform their duties in good faith, and dishonestly or fraudulently.

To use their position as a director for the proper purposes

A director has an enviable position that allows them to control the company’s business. It is important that they do not abuse this position to act in their own interest, or the interest of someone else. In addition to this, a director would commonly come into information as a result of his or her position. A director cannot use this information to act in their own interest or the interest of someone else.

To avoid conflicts of interest

Directors also have a duty to avoid any actual or potential conflict between their interests and the interests of the company. This arises from the duty of a director to act in the best interests of the company.

To prevent the company from continuing trade if it is insolvent

A director has a duty to prevent the company from incurring additional debt if there is a reasonable suspicion that the company cannot pay its debts when it falls due. This duty is not exercised for the benefit of the shareholders, rather it is exercised for the benefit of the creditors.

Other duties and responsibilities

There are numerous other laws affecting trade practices, taxation, environmental protection, and occupational health and safety that apply to companies. A breach of those other laws may give rise to a director being held liable for the breach.

Summary

If you are a director of a company, it is important to be aware of the core responsibilities and duties that have been imposed upon you by the law. While your primary duty is towards the company, you also have duties towards the shareholders, creditors, and the public. The failure to comply with these duties may result in directors being held personally liable for breaches of these duties. If you are unclear about the duties you should comply with or you are unsure of where you stand, you should seek legal advice as soon as possible.

Introduction to Intellectual Property

“Intellectual Property” is a phrase that is often thrown around these days. Most people understand that it can be valuable, that it can be an important element especially in today’s highly competitive markets. However, most people do not understand what it actually consists, and what rights go with it.

There are several types of intellectual property:

Patents

A patent is a right to protect something that you have invented. It can be a device, substance, method, or process, and it has to be new, inventive, and useful. You cannot patent artistic creations, mathematical models, plans, schemes, or mental processes. Patents have to be examined and registered with IP Australia, the Australian Government’s Intellectual Property body.

Having a patent gives you the exclusive right to commercially deal with your product for the lifetime of the patent. In Australia, the standard patent lasts for 20 years, and annual maintenance fees are payable.

While patents give you protections for your product, remember that patents only last for a limited period of time, after which your patent becomes part of the public domain. This may be an issue for you if you would like your product to be exclusively sold by you in the long run.

Trade Marks

A Trade Mark is a mark that represents your business’s image or brand. A Trade Mark can be a phrase, logo, symbol, design, image, aspect of packaging, or combination of these. In some circumstances a Trade Mark may even be a sound, smell, shape, or colour. It is used to distinguish your goods and services from the goods and services of other businesses.

Registration of your Trade Mark gives you the exclusive legal right to use, license, or sell it to others within the territory that it is registered in. Registration is not compulsory; however registration reinforces already existing protections under common law.

Copyright

Copyright is a protection of the original expression of an idea, not the idea itself.  Copyright protects original works of art, literature, music, films, sound recordings, broadcasts, and computer programs. In Australia, Copyright is not registered and protection is automatically provided when the work is written down, painted, or recorded.

Copyright generally lasts for 70 years from the author’s death. Once copyright has expired it becomes part of the public domain.

Designs, Circuit Layout Rights, and Plant Breeder’s Rights

Designs are the features, shapes, patterns that give a product a unique appearance. An artistic design is covered by copyright but a registered design gives you exclusive right to commercially exploit the product.

Circuit Layout Rights refer to designs for circuits and computer chips. They do not need to be registered however the rights can last up to 20 years from the year the layout was made.

Plant Breeder’s Rights are protections on new breeds or varieties of plants. They must be registered and the protections generally last for 20 to 25 years.

Confidentiality and Trade Secrets

You should consider confidential information and trade secrets to be also intellectual property. After all, nobody can infringe on your right if nobody knows about it or knows how to reproduce the work. In certain situations a confidentiality or trade secret strategy may be appropriate to protect your intellectual property. Your strategy can be backed up or reinforced with confidentiality agreements.

All in all, intellectual property protection can be complicated.

As it is a developing area of law, it changes frequently and you should always get advice from your lawyer or an intellectual property specialist.