BLAW20001 Lecture Notes - Lecture 3: Board Of Directors, Proprietary Company, De Facto

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CORPORATE LAW WEEK 3
Decision making in companies
How does the Law allocate decision-making power? Power to make decisions is divided between the company’s two
organs, the members in a general meeting and the board of directors (directors/board). The division of their power
depends on what is listed in the Act, internal governance rules and company law cases.
Who runs the company day-to-day?
s 198A [RR]: Directors usually have general power of management.
Role is to manage/direct the management of (supervise) the company. The board is able to make all decisions except those
expressly awarded to members in a general meeting by the Act or internal governance rules (RR’s or constitution).
Provided the constitution permits, the board can delegate certain functions to committees of the board e.g. audit
committee: s 198D
s 198C [RR]: Generally board delegates day-to-day management to the CEO/ managing director.
s 198D:
What if Members don’t like what the board decides? Members cannot interfere with powers of board. Automatic Self-
Cleansing Filter Syndicate v Cunninghame and John Shaw & Sons
Options are available to members who disagree including voting out the board, selling shares or changing s 198A or other
rules.
Directors
s 201A: Minimum number of directors – 1 for proprietary and 3 for public.
Types of directors include those properly appointed (elected by company in general meeting or appointed by other
directors under special power) as well as De facto and shadow directors.
Members vote directors onto the board
s 201G [RR]: Members elect the directors by ordinary resolution.
s 201H [RR]: Members must approve appointments made by directors under casual vacancy power.
Table 10.1 ‘How are directors appointed and removed’ for differences between Pty ltd, unlisted public and listed public
companies.
Members remove directors from the board: Vote in general meeting
s 203D: Public company (must be an ordinary resolution)
s 203C [RR]: Proprietary company (ordinary resolution) Note this is a replaceable rule but it applies until it is replaced.
s 203A: director can resign
Can directors control the composition of the board?
s 203E: directors of a public company can’t be removed by other directors
s 203C [RR]: Pty Ltd.
s 201K [RR]: Alternate directors
s 201J [RR]: directors appoint managing director (MD)
s 248E: directors elect chair of board
s 203F: directors can revoke appointment of MD
Part 2D.6: Disqualification
Who can be appointed?
s 201D: someone who consents.
s 201B(1): human not company
s 201B(1): minimum 18 years old
s 201B(2): not disqualified – cannot be bankrupt, convicted of certain offences, or subject to banning order.
s 9: De facto and shadow directors. Means by which duties and accountability of directors can be imposed on someone
(human or body corporate) who is not appointed as a director
Standard Chartered Bank v Antico and Buzzle v Apple
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Document Summary

Power to make decisions is divided between the company"s two organs, the members in a general meeting and the board of directors (directors/board). The division of their power depends on what is listed in the act, internal governance rules and company law cases. Who runs the company day-to-day? s 198a [rr]: directors usually have general power of management. Role is to manage/direct the management of (supervise) the company. The board is able to make all decisions except those expressly awarded to members in a general meeting by the act or internal governance rules (rr"s or constitution). Provided the constitution permits, the board can delegate certain functions to committees of the board e. g. audit committee: s 198d s 198c [rr]: generally board delegates day-to-day management to the ceo/ managing director. s 198d: Cleansing filter syndicate v cunninghame and john shaw & sons.

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