Line 5 · The company
When does a business consultant become a director?
The definition: a director is not only the person appointed. Section 9AC of the Corporations Act 2001 provides that a director of a company or other body is a person who is appointed to the position of a director, or is appointed to the position of an alternate director and is acting in that capacity, regardless of the name that is given to their position, and, unless the contrary intention appears, a person who is not validly appointed as a director if they act in the position of a director, or the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.
Why this matters to a business owner hiring an adviser: the section reaches the adviser whose word the board simply follows, and it excludes advice given in a proper professional capacity. This guide is short by design. It covers only what the Act’s definitions and duty sections hold, and it stops where they stop: the words quoted on this page do not settle whether every directors’ duty reaches a person who is a director only because the board follows their instructions.
Any adviser
Licensed, registered, or a director
- 1 TaxApplies tax law to your own circumstances, and you rely on it, for a feeTax agent or BAS agent, registered with the Tax Practitioners Board
- 2 Financial productsRecommends which financial product to buy: shares, super and insurance among themAFS licensee, or an authorised representative of one
- 3 CreditSuggests or assists with a specific contract from a specific credit providerCredit licensee, or a credit representative of one
- 4 Legal workAdvises on, or drafts, the terms of a contractAustralian legal practitioner, holding a current practising certificate
- 5 The companyThe directors are accustomed to act in accordance with the adviser’s instructions or wishesA director in law, with no appointment needed
General information about how Australian law treats business advice. It is not tax, financial or legal advice. Check an adviser on the official register, where a line names one.
The test in section 9AC
The appointed side comes first. The Act provides that a director of a company or other body is a person who is appointed to the position of a director, or is appointed to the position of an alternate director and is acting in that capacity, regardless of the name that is given to their position.
Then the unappointed side, which is the crossing on the home page. Unless the contrary intention appears, a person who is not validly appointed as a director is a director if they act in the position of a director, or the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.
The section carries its own exclusion. The second limb sits in brackets in the Act: it excludes advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation. That exclusion is the boundary the home page draws between advising and directing, and it is the section’s own words, not a gloss.
The wider officer test
Section 9AD defines an officer more widely than section 9AC defines a director. An officer of a corporation (other than a CCIV) is a director or secretary of the corporation, or a person who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation.
The definition continues: a person who has the capacity to affect significantly the corporation’s financial standing, or in accordance with whose instructions or wishes the directors of the corporation are accustomed to act, again excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation.
The difference between the two definitions: section 9AD also reaches a person who makes, or takes part in making, decisions that affect the whole or a substantial part of the business, or who can significantly affect the corporation’s financial standing, whether or not the board follows their instructions. Section 9AC’s second limb turns on the board’s habit of acting on the person’s instructions or wishes.
What follows for a director in law
The Act’s duties are stated for a director or other officer. The care and diligence duty: a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation’s circumstances, and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Good faith and purpose: a director or other officer of a corporation must exercise their powers and discharge their duties in good faith in the best interests of the corporation, and for a proper purpose.
Use of position: a director, secretary, other officer or employee of a corporation must not improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation.
The caveat the section itself carries, stated plainly: section 9AC’s unappointed-director limb opens with the words ‘unless the contrary intention appears’, and this guide does not say that every duty above reaches a person who is a director only because the board follows their instructions. The Act’s words quoted here do not settle that question, so the guide states the duties as the Act states them and stops there.
There is no register for this line
This crossing has no register to check, unlike the tax, financial product and credit rows on the home page. The line is drawn by the Act’s definitions, section 9AC and section 9AD, and this page cites them directly rather than a regulator’s list.
What a business can still do is what the other four rows do: check the register that matches the work the adviser is actually licensed or registered to do.