Chapter 10 Directors and Officers www.learnnowbiz.com Corporate Governance

Types of Director Independent or non-executive directors Not involved in day-to-day management Executive directors Responsible for daily operations Alternative directors Temporary directors, with no legal status Nominee directors Represent the interests of particular stakeholders, such as creditors.

Restrictions To be a director, four conditions must be satisfied: Consent to the appointment in writing. Be an individual. Be at least 18 years old. Not be disqualified from being a director. A proprietary company must have one at least one Australian director. A public company requires at least three directors.

Appointment and Removal A director is defined as: A person appointed to position as a director or alternative director. A person not validly appointed (a de facto director). A shadow director. Removal Shareholders may vote a director off of the board at a general meeting.

Fiduciary Position Directors must act in the interests of the company. This is the Fiduciary Relationship. A director may not benefit from their position at the expense of the company.

Powers and Functions Power of Management: The general rule is that the decision-making powers of directors extend to any matters not granted to the members or otherwise restricted by the replaceable rules or constitution. The power of management is also bestowed upon: A person who makes decisions that affect a substantial part of the organisation A person who may affect the company’s financial standing A receiver of manager of property of the company A trustee involved with the company.

Directors’ Meetings The Corporations Act sets out rules dealing with the conduct of meetings, including: The requirement to keep minutes of proceedings and resolutions. That they be called or conducted using any technology consented to by all the directors.

Calling a Directors’ Meeting Usually dictated by the constitution. The replaceable rules provide that any director may call a board meeting. A period of notice for meetings is usually contained within a constitution. Quorum requirements stipulate that a minimum number of directors must attend.

Making Decisions Usually made by majority vote with each director receiving a vote. The constitution may vary the number of allocated votes. Informal Decisions Constitutions usually allow directors to ‘vote sign’ on a resolution without a physical meeting.

Delegation Unless the constitution states otherwise, a company may delegate any of their powers to any person. Day to day management is usually delegated to a CEO or managing director.

Responsibility for Actions of Delegates Each director is responsible for the actions of a delegate. The director is immune to responsibility if they believed that: The delegate would exercise power responsibly and within the duties imposed upon directors.

Rights to Information Directors have a right to company information to allow them to undertake their tasks efficiently, including: A statutory right to access financial records. A common law right to access broader company information. A right to inspect the books of the company.

Company Secretaries A company secretary is the administrative officer of the company and has the following responsibilities: Lodgement of notices with the ASIC. Ensuring the company has a registered office. Notifying the ASIC of changes. Lodgement of financial reports. Verifying minutes of meetings. The secretary is appointed by the directors. Proprietary companies are not required to employ a company secretary.

Company Secretaries An individual is allowed to assume that a company secretary has been appointed properly and can wield authority delegated by a director. This is the principle of ‘apparent authority’. This means that if a company secretary lacks authority and yet makes a contract with a third party, then that contract will retain force of law.