Directors' duties in an AI world - a practical guide for Australian businesses

Technology can support decisions, but directors still remain accountable

Artificial intelligence is quickly becoming part of everyday life for many. Companies are using AI to draft reports, analyse data, review contracts, and streamline administrative tasks. As the technology continues to evolve, it's easy to see why boards are exploring new ways to improve efficiency and support decision-making.

At Hardies Lawyers, we're seeing more directors ask the same question – if AI helps make a decision, who is responsible when something goes wrong?

The answer is simple. AI may be a valuable business tool, but it doesn't change a director's legal obligations. The Corporations Act still requires directors to exercise independent judgement, act with care and diligence, and make decisions that are in the best interests of the company. As regulators continue to focus on the governance of AI, boards also need to consider broader obligations around privacy, risk management, and corporate governance.

AI is changing the way boards work

AI has the potential to improve efficiency across almost every area of a business.

Boards are already using AI to summarise lengthy reports, analyse operational data, review commercial documents, and assist with preparing meeting papers. For many businesses, particularly smaller listed companies with lean management teams, these tools can save valuable time and allow directors to focus on higher-value strategic decisions.

Used appropriately, AI can become another source of information that supports better decision-making. Like any other business tool, however, its outputs should be considered carefully rather than accepted without question.

The role of directors hasn't changed simply because technology has become more sophisticated.

Directors' duties still apply

One of the most important obligations for a director under the Corporations Act is the director's duty of care.

Section 180 requires directors to exercise their powers and perform their duties with the degree of care and diligence that a reasonable person would exercise in the same circumstances.

That obligation doesn't disappear because AI has been involved in the decision-making process.

If an AI platform prepares a report, analyses financial information, or recommends a particular course of action, directors still need to understand the information they're relying on. They should ask questions, consider the reliability of the output, and apply their own commercial judgement before making a decision.

Technology can assist the board, but it cannot replace the board.

As AI becomes more common across Australian businesses, maintaining strong oversight will become an increasingly important part of fulfilling directors' duties and responsibilities.

Accountability still sits with the board

One of the biggest misconceptions surrounding AI is that responsibility somehow shifts to the technology.

It certainly doesn't.

If an AI-generated report contains incorrect information, if an AI tool contributes to a misleading ASX announcement, or if directors rely on inaccurate outputs without appropriate oversight, regulators are unlikely to accept that 'the AI made the mistake' as a defence.

A breach of directors' duties under the Corporations Act can expose directors and companies to significant legal and commercial consequences. Depending on the circumstances, this may include regulatory investigations, shareholder claims, reputational damage and, in some cases, personal liability.

Understanding the potential remedies for breach of directors' duties in Australia is important, but prevention is always the better approach. Boards should establish appropriate governance processes before AI becomes embedded in day-to-day decision-making.

Privacy can't be overlooked

AI also raises important questions under the Privacy Act 1988.

Many AI platforms process information that may include employee details, shareholder information, customer records, or commercially sensitive material. Before uploading this information into an AI system, directors should understand how that data will be collected, stored, used, and protected.

The Office of the Australian Information Commissioner has made it clear that existing privacy obligations continue to apply when organisations use AI. That includes making sure that personal information is handled appropriately, only used for authorised purposes, and protected against unauthorised access or disclosure.

Businesses introducing new AI tools should also consider whether a Privacy Impact Assessment is appropriate, particularly where personal information forms part of the system's inputs or outputs.

Governance expectations are evolving

Although Australia doesn't currently have legislation specifically regulating artificial intelligence, regulators have been clear that boards are expected to maintain effective oversight of emerging technologies.

For ASX-listed companies, this extends past legal compliance. The ASX Corporate Governance Principles and Recommendations encourage boards to establish appropriate risk management frameworks and oversee material business risks. As AI becomes more integrated into business operations, many organisations will need to consider how AI governance fits within those existing frameworks.

That doesn't necessarily mean creating layers of unnecessary bureaucracy.

It means understanding where AI is being used, identifying the associated risks, setting clear internal policies, and ensuring appropriate human oversight remains in place.

Good governance has always been about asking the right questions, and AI simply gives boards a new area to consider.

Questions every board should be asking

As AI becomes more common across Australian businesses, directors should regularly ask:

1. Do we understand where AI is being used across the business?
2. Have we established clear policies for the use of AI?
3. Are important decisions still subject to appropriate human oversight?
4. Have we considered our obligations under the Privacy Act 1988?
5. Do our existing governance and risk management frameworks adequately address AI?

These conversations don't need to be complex, but they do need to happen.

Good governance still starts with people

Artificial intelligence will continue to reshape the way businesses operate, but it hasn't changed the legal responsibilities of company directors.

The Corporations Act still requires directors to exercise independent judgement and act with care and diligence. AI may support better decisions, but it cannot replace the experience, oversight, and accountability that sits around the board table.

For businesses embracing new technologies, the strongest governance frameworks will combine innovation with sensible risk management. That's what builds confidence with regulators, investors, and shareholders alike.

Talk to Hardies Lawyers

As AI becomes a bigger part of corporate decision-making, boards need practical advice that balances innovation with good governance.

At Hardies Lawyers, we help founders, senior executives, and boards navigate evolving governance challenges under Australian corporate law. From reviewing governance frameworks and board policies to advising on AI-related risk and compliance, we provide practical legal support that's tailored to the dynamic junior resources market.

If your board is exploring the use of AI or reviewing its governance framework, contact Hardies Lawyers to discuss how we can help your business remain compliant while embracing new opportunities.

Disclaimer: This article is for educational purposes only and does not constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.