Directors‘ Responsibilities Transferring Group Funds

UNDERSTANDING DIRECTOR DUTIES, SOLVENCY RISKS, AND PERSONAL LIABILITY IN GLOBAL CORPORATE GROUPS 

In global corporate groups, it’s easy to fall into the mindset that money is shared. 

Transfers happen, head office directs decisions, and the assumption is that what benefits the group benefits everyone. 

But under Australian law, that’s not how it works. 

Each company is a separate legal entity — with its own obligations, risks, and creditors. As a director, your duty is to that company alone.  

That means you can’t simply approve a transfer, loan, or dividend because it’s been requested. You need to stop and consider whether the decision protects the company’s position — including its solvency and ability to meet its own obligations. 

In this episode of The Travelling Lawyer, Fiona Henderson explains where directors can get caught out in group structures — and how to navigate pressure from parent entities without exposing yourself to personal liability. 

We explore this topic in more depth in our blog post: Intercompany loans: what Australian directors need to know before transferring funds to a parent company.

 

VIDEO SCRIPT

“Just transfer the funds — it’s all group money, right?”
Wrong.
That commercial mindset could put you — as a director — in serious legal trouble. 

In global corporate groups, it’s common to treat money as shared.
The parent company wants flexibility. Finance moves between entities to minimise tax. And the assumption is: what’s good for the group is good for everyone.
But in Australia, that’s not how the law sees it. 

Under Australian law, every company in the group is a separate legal entity.
That means: 

• It has its own creditors. 

• It has its own duties. 

• And as a director, your job is to act in that company’s best interests — not the parent’s. 

So when head office asks you to transfer funds up the chain, or approve a loan, or pay a dividend — you can’t just say yes.
You have to stop and ask: 

• Will this compromise solvency? 

• Could this prejudice our ability to meet our own obligations? 

• Are we protecting this company’s position — or just following orders?” 

Take one real example.
A parent company asked its Australian subsidiary to lend them $100,000.
But the subsidiary’s cash wasn’t surplus — it included advanced payments from clients, tied to future project delivery potentially held on trust for those clients until the project was delivered.
If one of those projects was cancelled, the funds would have to be repaid.
Authorising that loan could potentially put the directors in breach of their duty — and personally liable. 

What’s good for the group might not be good — or even legal — for the subsidiary.
And the law won’t care if the request came from Helsinki, Hamburg, or head office down the hall. It will look at you, the Australian director, and ask: did you do your duty? 

If you’ve ever felt pressure to sign off on a transfer that didn’t sit right — you’re not alone.
And you don’t have to navigate it alone.
Because ‘just sign these execution pages’ isn’t good enough — not when the liability has your name on it.