Corporate Governance: The Directors’ Role


Updated February 14th 2020

Chris Chappell

In the dynamic world of business, it is now more important than ever to understand the directors’ role.

The system of Corporate Governance guides the rules, practices and processes that direct and control an organisation. Directors are faced with a challenging role – aligning the interests of management, employees, stakeholders and shareholders. Every decision made must consider how it will affect others within and outside of the business.

In large corporate organisations it’s a little easier to have the board of directors take on the strategic role and not be involved with operation aspects of the organisation. Obviously, this is more difficult for sole directors of the company that are often managing the business whilst performing multiple roles within.

Small to medium business and sole directors can benefit greatly to adopt best practices; utilising external stakeholders for advice and guidance to assist in managing risk to the company and directors.

It is imperative that directors understand their roles, particularly the financial position of the business they are governing, be it the sole director or board of directors, ensuring the company doesn’t trade if insolvent; understanding directors’ personal liability and how to minimise risk and safeguard the success of the organisation.

In cases of insolvent trading the statutory defences available for directors under the Corporations Act may be difficult to rely on if directors have not kept themselves informed of the organisations financial position.

Single Touch Payroll is the beginning of reporting live data directly to the ATO. This will allow for Director Penalty Notices (DPN) to be issued by the ATO a lot quicker as data matching tools will increase. A DPN gives the ATO power to collect unpaid PAYG and superannuation liabilities of the company directly from the directors. New provisions introduced on 1 April 2019 also see criminal sanctions can apply to unremitted superannuation liabilities.

Locked down DPNs are issued to company directors when the company has failed to lodge its business activity statement, instalment activity statement or superannuation guarantee contribution advice within 3 months of their due lodgement date.

New provisions are now in place for lock downs and once the PAYG or Superannuation liability is in lock down appointing an insolvency practitioner to the company will NOT avoid personal liability of directors.


Having the right software that is appropriate and current for the industry type is essential in providing management with timely and accurate numbers on how the organisation is performing. Ask the questions: Is your software being used to its optimum? Are you and key staff members aware of all the functionalities of your cloud software? Is data being entered expediently or are you processing information that is already dated?

It is critical for directors to be aware of the financial position of the organisation(s) they are governing considering the data matching and penalty regime now in place. Now is the time to ensure the currency and accuracy of data and to understand what the financials say about the financial position and the sustainability of the business, whether that be growth, sustainability in a changing market or exit strategies.

CIB has dedicated advisory teams that can assist in the following areas:

  • Assist with transitions of data from manual, or desktop software to cloud based software;
  • Recommend applications that assist in processes and reporting;
  • Utilising software to streamline processes whilst maintaining internal controls;
  • Provide guidance and support at regular intervals and discuss financial information, Implement systems and procedures, best practice guidelines, training manuals;
  • Assess how staff are utilised within the organisation;
  • Benchmarking and valuation tools;

All of which contribute to good corporate governance for organisations regardless of size, and empower directors and key staff members in pivotal decision making.