You’ve built a successful business. Now an opportunity arises to join another company’s board of directors. It sounds like a great next step: a chance to share your expertise, expand your network, and influence strategic decisions.

A board seat isn’t just a badge of honour.  it’s a legally accountable position that can expose your personal assets and reputation if things go wrong.

Here’s what every business owner should think about before accepting a board position.

Ask: what am I really taking on?

Joining a board means taking on fiduciary and statutory duties under Australian law. You’ll be expected to act in the company’s best interests, ensure it remains solvent, and comply with an ever-growing list of regulations.

If the company trades while insolvent, fails to meet workplace obligations, or breaches safety or environmental laws, you could be personally liable.

Before you commit, make sure you:

• Understand your legal responsibilities under the Corporations Act 2001 (Cth), Fair Work Act 2009 (Cth) and local Work Health and Safety laws;
• Ask for the company’s key governing documents, financial statements, workplace policies, and information about any director indemnity arrangements;
• Familiarise yourself with your obligations as a board member. Get clarity around the board meeting rhythm, any committees of the board that have been established and get to know the executive team. Understand how often you will be needed and when, and how much time you will need to set aside to carry out your role; and
• Seek independent legal advice on any areas you’re unsure about.

Taking the role without clarity could mean inheriting risks you had no part in creating and may expose you to personal liability.

Protect what you’ve built

Strong, informed directors not only protect the business, but they also protect themselves.

As a business owner, your personal assets including your home, investments, or savings may be vulnerable if something goes wrong while you’re on the board. This is because company directors can be held personally liable for certain company conduct.

Before you take your seat, make sure you’ve put in place an asset protection strategy that separates your wealth from the potential liability that can arise as a result of company directorship.

Consider:

• Holding your assets in a trust or other protected structure;
• Investigating the business’ known risks, and reviewing how the business identifies and manages these risks;
• Reviewing your insurances and enquiring whether the company will provide Directors & Officers (D&O) liability cover and/or provide you with a director’s indemnity; and
• Getting tailored legal and accounting advice to identify any gaps in protection.

A well-structured protection plan gives you confidence to lead without risking your family’s financial security.

Know who you’re getting into business with

Every company has a story, and not all of them are good ones.

Before you accept a board appointment, treat it like a business partnership. Do your due diligence on the company, its leadership, and its culture.

You should check:

• The company’s financial position and solvency;
• Any outstanding legal disputes, tax issues, or regulatory investigations. For example, has the company ever been investigated by an external regulator? If so, why? Have there been any workplace investigations, incidents or claims in the last 12 months? How were they handled?;
• The track record of the other directors and shareholders; and
• Whether the business aligns with your professional reputation and values.

Ask yourself: Would I trust this company with my personal reputation?

If the answer isn’t an immediate “yes”, do more digging.

If something is unclear, request documents and information until you are satisfied.

Good governance isn’t just about showing up to meetings. It’s about staying informed, asking the right questions, and understanding the risks facing the business.

The bottom line

Joining a board can be a rewarding step for business owners who want to contribute their experience and broaden their influence. However, taking on the role of director demands caution and preparation. After all, there is no reward without risk.

Before you accept the offer, take the time to protect yourself, understand your legal responsibilities and get to know the business that you are investing time and energy in.

That extra due diligence now can save you significant stress and potential liability later.