You are on page 1of 3

Lecture 5 : Introduction to Directors

SECTION 198A: The business of a company must be managed or handled by its directors Who is a Director? SECTION 9:- Anyone officially appointed as a director. - Anyone who is appointed as an alternate director and is acting as a director regardless of title. **Also considered a Director if: - They act in the position of a director. - If the other directors are accustomed to act in accordance (ie OBEY) that persons instructions. De facto directors persons who act in the position of a director even though they have not been appointed to that position. Shadow directors Persons whose instructions ad wishes are customarily followed by the directors of the company. Types of Directors Managing Director (s 201J): that directors may appoint one of themselves to act as a managing director of a CEO is in charge of overseeing the companys daily business. This person will be accountable to the board. Chair of Directors- (s248E): Directors may appoint a director to chair their board meetings. This person is chooses which matters and documents need to be brought to the boards attention. At the end of the meeting, minutes must be signed by this person. Executive Directors These are full time employees of the company and are in charge of handling the daily business of the firm. Non- executive Directors Are not directly involved in the daily management of the companys business. They are part-time involved in the company and participate in board meetings to monitor the activities of the management team. Supposed to consider company as a whole and will probably be called in to be an unbiased opinion whenever conflicts arise. Alternate directors (s201K(1)):This is someone whom a director appoints (with the approval of the other directors) to act and exercise his powers on his behalf. This means this person can go for board meeting and act as a director. (s205B):This appointment has to be reported to ASIC. * s117 says that every company must first be registered with ASIC Nominee Directors When a director is appointed to represent the interests of a particular shareholder or creditor on the board of directors. For example a holding company normally appoints a director in its subsidiary company to look out for its interests. APPOINTMENT OF DIRECTORS (s201A) A propriety company has to have at least 1 director and a public company has to have at least 3. The first directors have to be named in the application for registration of the company (ie directors have to be registered!)

Who can be appointed? - S 201B: Must be over 18 and will be appointed by the members of the company. - Cannot be a body corporate and must be a natural person. - S 201A: For a public company, at least 2 of their directors must LIVE in Australia. - A person is allowed to be a director of more than one company. And also the duty of secretary can also be undertaken by a director. Consent - A person must consent to becoming a director of the company by signing a consent form and giving it to the company. This form does not need to be lodged with ASIC. - A company is in breach of s201D if it appoints a director who has not given his consent. Disqualification from Managing a Corporation (Part 2D.6) Automatic Disqualification: (a) S206B: They have committed criminal offences or have been bankrupt (holds for 5 years) Disqualification by Court: (b) s206C: for Contravention of civil penalty provision (c ) s206D: if the person was an officer of 2 or more failed companies (poor management) in the last 7 years. (This holds for 20 years) (d) s206E: if the person repeatedly contravened the Corporations Act (at least 2 times) Disqualification by ASIC: (f) s206F: if a person has managed 2 companies that have gone into liquidation in the last 7 years. **Disqualified persons may only be appointed as a director of a company if ASIC has given its permission A person who has been disqualified commits an offence if: (a) they make or participate in the making of decisions that will affect the company as a whole (b) they exercise the capacity to affect significantly the corporations financial standing (c ) they communicate instructions to the directors of the company knowing that other directors are used to obeying their instructions.. or with the intention that directors will act in accordance with those instructions. Removal of Directors S203A: Directors may be removed by the resolution (which means everyone agrees and votes) by the members of the company (shareholders). S203D: However for public companies this rule is replaceable meaning that the company can put in place its own regulations regarding removal of directors. This is reasonable because there are many more stakeholders for a public company and if a director if not removed and replaced, the wellbeing of such stakeholders would by compromised. In a public company, the constitution cannot restrict the removal of directors by members. S2203A: a director must resign from office by giving written notice. The power of Management S198: The business of the company is to be managed by the directors. Management- the replaceable rule give the directors the power to manage the business of the company. Companys Power- Directors may exercise all the powers of the company EXCEPT any powers that the Corporations Act or the companys constitution requires the company to exercise in general meeting. (ie directors can issue shares or debentures and borrow money on the companys behalf)

Delegation of Powers- Unless the companys constitution states otherwise, directors may delegate any of their powers to a committee of directors, a director, an employee or any other person. Registration of transfers of shares A person who is transferring shares remains the holder of the shares until the transfer is registered and the name of the transferee is entered in the companys share register. Calling meetings- directors are allowed to call meetings for other directors. Dividends Directors have the power to determine if a dividend is payable or not. They may also fix amount, time and method of payment. Execute documents - ** seems important S127: a company may execute a document without a common seal if the document is signed by: -2 directors OR -a director and the company secretary OR -in a case where the company has only one director and one secretary, that person must sign. When a common seal is used, a document can be executed as long as the seal is affixed with the witness of the directors mentioned above. (ie signature of directors are equivalent to the affixation of the seal in their presence)

You might also like