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Directors
Corporate Law (MLL221)
Deakin University
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Company Law - NotesPreview text
DIRECTORS (& Secretaries)
Definition [Party] is a director/ de facto/ shadow because meets S 9 CA definition: S 9: "director" of a company or other body means: a) a person who: i. is appointed as a director; or ii. is appointed as an alternate director and is acting in that capacity; regardless of the name that is given to their position; and a) unless the contrary intention appears, a person who is not validly appointed as a director if: i. they act in the position of a director; or ii. the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes. De facto = appointed to position but not described as director Shadow = not appointed to position but other directors follow their instructions
Appointment of Directors
- S 201D: Person must consent in writing to appointment
- S 201B(1): Individual, not a company
- S 201B(1): Minimum 18 years old
- S 201B(2): Must not be disqualified from being a director
- E. Disqualified because of bankruptcy or conviction for fraud
- Check constitution
- If Replaceable Rules apply:
- S 201G: Members may appoint by ordinary resolution (Board may appoint but members must confirm appointment)
- S 201H(2): Within 2 months for proprietary companies
- S 201H(3):
- At next AGM for public companies
- If Replaceable Rules apply:
Powers of Directors RR S 198A(1): The business of a company is to be managed by or under the direction of directors RR S 198A(2): The directors may exercise all the powers of the company except any power that this Act or the company’s constitution (if any) requires the company to exercise in general meeting John Shaw & Sons (Salford) Ltd v Shaw OR Automatic Self-Cleaning Filter Syndicate Co Ltd v Cunninghhame – members and directors can’t interfere or override the other. IGR determine the powers of each.
Restrict Powers of Directors by:
- Remove directors and replace them with amendable directors
- Public Co: S 203D (remove)
- Pty Co: RR S 203C (remove) & RR S 201G (appoint)
- S 136(2): Change company’s constitution to restrict directors’ powers to act without obtaining member consent
Delegation of Powers of Directors S 198D: Unless the company’s constitution provides otherwise, the directors of a company may delegate any of their powers to:
- a committee of directors;
- a director;
- an employee; or
- any other person (vicarious liability)
- S 190(1): Director who delegate under s is responsible for the exercise of the power by the delegate as if the power had been exercised by the director themselves (defence to vicarious liability)
- S 190(2): However, director not responsible if:
- Believe on reasonable grounds delegate would act in conformity with directors duties; and
- Believe on reasonable grounds, in good faith, after proper enquiry delegate reliable and competent in relation to power delegated
Was Board Meeting Properly Held?: - Check constitution - If the Replaceable Rules apply: - Any director may call on reasonable notice (S 248C) - Quorum of two directors (S 248F) - Resolution passed where no quorum is void - Resolution - By majority vote - One vote per director - Chair may have casting vote - Directors may agree to meet by telephone (S 248D) - Circulating written resolution (S 248A) - Inadequate notice and lack of quorum invalidate termination of contract: - No notice was given of meeting and of resolution either (Petsch v Kennedy) - Fair and reasonable notice is required (Toole v Flexihire Pty Ltd). - Notice did not include a clear and full summary of business to be conducted (Devereaux Holdings v Pelsart) - Quorum must be present at all times during the meeting Mancini v Mancini
Composition of company DIRECTORS S 201A(1): Proprietary companies
Must have at least one
One must ordinarily reside in Australia S 201A(2): Public companies
Must have at least three
Two must ordinarily reside in Australia
S 203D: Members may remove by ordinary resolution
S 203E: Board can NOT remove director
Disqualification 1. Automatic disqualification due to conviction for certain offences (S 206B(1)) 2. Automatic disqualification due to bankruptcy (S 206B(3)) 3. Court can order disqualification due to breach of civil penalty provision 4. Court can disqualification due to involvement in two or more failed companies (S 206D) 5. Court can order disqualification for repeated contravention of Corporations Act (S 206E) 6. ASIC can disqualify as result of liquidator’s adverse report (S 206F) - ASIC/Court may grant leave to manage a company despite disqualification in certain circumstances
Directors
Course: Corporate Law (MLL221)
University: Deakin University
