Director Duties and ASIC Enforcement: What Changed in 2026

The role of a company director has always carried legal weight under the Corporations Act 2001. In 2026, however, the environment around that role has shifted. ASIC is publishing more enforcement outcomes, liquidators are asking harder questions about pre-insolvency transactions, and directors of small and medium businesses are finding themselves personally exposed when governance has been treated as an afterthought.

This article is written for Australian business owners who sit on company boards, act as shadow directors, or are thinking about incorporating. It explains the duties that matter most, what has changed this year, and the practical steps you can take to reduce your risk.

The basics have not changed, but the stakes are higher

Directors' duties are found in Chapters 2C and 2D of the Corporations Act. The core obligations every director should understand are:

• Act in good faith and for a proper purpose — decisions must be made honestly and in the best interests of the company, not for personal gain or to favour one creditor over others.
• Exercise care and diligence — the standard is that of a reasonable person in the same circumstances, taking into account your role, responsibilities and what the company does.
• Not misuse position or information — using your directorship or company information for personal advantage or to harm the company is a breach.
• Prevent insolvent trading — directors must not allow the company to incur new debts when there are reasonable grounds to suspect it cannot pay them.
• Keep proper books and records — the company must maintain financial records that correctly record and explain its transactions and financial position.

These duties have been in place for years. What has changed in 2026 is the intensity with which they are being enforced, particularly around insolvency-related conduct, director penalty notices and governance failures.

What changed in 2026

ASIC enforcement is more visible

ASIC has continued to ramp up its public reporting of enforcement action against directors. In 2026, the regulator has focused on failures to assist liquidators, breaches of the duty to prevent insolvent trading, and directors who allow companies to operate while restructuring or insolvency options were clearly needed.

For small business directors, the lesson is that ASIC is no longer only targeting large listed companies. A proprietary company with a handful of employees and unpaid tax can still attract regulator attention if the conduct is serious enough. Penalties include fines, disqualification from managing companies, and in serious cases, criminal charges.

Insolvent trading remains a live risk

The safe harbour provisions introduced in 2017 still exist, but they are not a free pass. To rely on safe harbour, a director must be taking a course of action that is reasonably likely to lead to a better outcome for the company than immediate administration or liquidation. That action needs to be documented, informed by appropriate advice, and pursued properly.

In 2026, several court decisions have reinforced that safe harbour is not available simply because a director hopes things will improve. You need a plan, you need advice, and you need to stop incurring debt that is not part of the turnaround strategy. If your business is trading while insolvent and there is no documented recovery plan, you are exposed.

Director penalty notices keep the pressure on

The ATO continues to use director penalty notices aggressively to recover unpaid PAYG withholding, GST and superannuation guarantee charges. In 2026, the ATO has resumed firmer collection activity after several years of pandemic-era restraint.

A non-lockdown director penalty notice can usually be remitted if the company pays the debt, enters administration, or begins winding up within 21 days. If the notice is a lockdown notice — typically because BAS or activity statements are unlodged — the only way to remit the penalty is to pay the debt. This is one of the fastest ways a director can become personally liable for company tax debt.

Books and records are under scrutiny

ASIC and liquidators are paying closer attention to whether companies actually keep the financial records required by section 286 of the Corporations Act. Inadequate records make it difficult to prove solvency, weaken a safe harbour defence, and can themselves lead to infringement notices or director disqualification.

If your company cannot produce reliable monthly management accounts, cash flow forecasts, or aged creditor reports, you are not just flying blind — you are increasing your personal risk as a director.

Practical steps to protect yourself

Most director liability issues are preventable with disciplined habits and early advice. Here is what we recommend to Australian business owners in 2026:

1. Know your numbers. Review management accounts, cash flow forecasts and tax obligations at least monthly. If you cannot produce them, ask your accountant to set up a reporting rhythm.
2. Hold regular board meetings or director decisions. Even in a two-director company, document key decisions, the information you relied on, and the reasons for the decision. Minutes matter if your conduct is later examined.
3. Get advice early. If the company is approaching insolvency, speak to an adviser experienced in restructuring and insolvency before the position becomes critical. Safe harbour and Small Business Restructuring options have strict time limits.
4. Do not incur new debt while insolvent. If the company cannot pay existing creditors as they fall due, avoid taking on new supplier credit, finance leases or personal guarantees unless it is part of a documented turnaround plan.
5. Keep lodgements current. Lodge BAS, income tax returns and superannuation guarantee statements on time, even if you cannot pay the liability immediately. Unlodged returns trigger lockdown director penalty notices.
6. Understand related-party transactions. Payments to yourself, family entities or associated companies can be challenged by liquidators as uncommercial transactions or director duty breaches. Document the commercial rationale.
7. Consider whether you should resign. If you are a director in name only and have no involvement in the business, resigning may reduce your exposure. Be aware that resigning does not erase liability for conduct while you were a director.

When to get help

You should seek professional advice promptly if:

• The company has received a director penalty notice or statutory demand.
• Creditors are threatening legal action or winding-up proceedings.
• You are unsure whether the company is solvent.
• You have been asked to join a board but are unclear on the risks.
• The company's financial records are incomplete or unreliable.

At DNA Advisory, we help directors understand their obligations, respond to ATO and creditor pressure, and explore options including informal workouts, Small Business Restructuring, voluntary administration and creditors' voluntary liquidation. The earlier you act, the more options you usually have.

Disclaimer: This article is general information only and does not constitute legal, financial, taxation or accounting advice. It is not tailored to your specific circumstances. Director duties, ASIC enforcement and insolvency law are complex areas, and you should obtain professional advice relevant to your situation before acting on any information in this article. Liability limited by a scheme approved under Professional Standards Legislation.