DIRECTORS. Introduction. Directors

Transcription

1 DIRECTORS Intrductin Cmpany Bard General meeting Bard (all directrs): S 198A(1) (replaceable): business f the cmpany is t be managed by r under the directin f the directrs May delegate General meeting (GM) (bdy f sharehlders) Appints and may refuse t re-elect directrs Exercises statutry and cnstitutinal pwers Divisin f pwers Mdern view - bard is nt simply an agent f the general meeting Histry Autmatic Self-Cleansing Filter Syndicate C Ltd (par 12.85) GM has pwers cnferred by CA and cnstitutin Dctrine f the supremacy f the cnstitutin Management pwers vest in bard unless cnstitutin determines therwise (par 12.75) GM may be allwed t intervene in exceptinal circumstances Which rgan is the mst pwerful? Directrs All cmpanies have directrs wh are cllectively called the bard f directrs Minimum number: Prprietary cmpanies: One directr ( s201a (1) ) Public cmpanies: Three (s 201A (2) ) Initial directrs are thse whse names appear n with their cnsent n the applicatin fr registratin Wh is a directr? Sectin 9 definitin: a persn wh is appinted t the psitin f directr r alternate directr OR if nt validly appinted and: He r she acts in the psitin f the directr a driving frce behind the cmpany (de fact directr) r the ther directrs are accustmed t act in accrdance with the persn s instructins r wishes (shadw directr) Nt merely because persn is prperly giving prfessinal advice r there is a business relatinship with directrs r cmpany

2 De fact and shadw directrs are included fr purpses f liability, nt pwers De fact directr Persns acting as directrs althugh they are disqualified (lacked a required share qualificatin) r certain appintment frmalities were nt cmplied with etc CAC v Drysdale (1978) 141 CLR 236: Where directr s appintment terminated but he carried n acting as directr Deputy Cmmissiner f Taxatin v Austin (1998) ACLC 16 1,555: Directr resigned but failed t file ntice with ASIC and cntinued t carry ut sme functins Whether persn acts as a de fact directr is a questin f fact Shadw directr Puppet master: Persns whse instructins are nrmally fllwed by the bard f directrs Must cntrl bard rather than single directr Re a Cmpany [1989] BCLC 13 Perhaps sufficient t cntrl the majrity vte at the bard? Can include a cmpany exercising such pwer e.g. a hlding cmpany Standard Chartered Bank f Australia v Antic (1995) 13 ACLC 1381 Excludes prfessinal advisrs/cnsultants Types f directrs Managing directr (CEO) in charge f daily business f the cmpany respnsible fr senir executives Nrmally has wide authrity t cnclude business cntracts n behalf f c Chair f directrs Appinted by ther directrs t chair meetings Imprtant functin Clrad Cnstructins Pty Ltd v Platus (1966): Tw directrs left a meeting after a brawl and the remaining directrs purprted t pass a reslutin. This was challenged and the Curt said this was invalid as n Chair had been appinted. In charge f gvernance f prfessinal peratin f bard higher duty fr functining f the bard ASIC v Rich Executive directrs: Take part in daily management f the cmpany Senir managers with substantial cntrl ver the cmpany s activities Nn-executive directrs: Participate in bard meetings t versee and infrm the activities f the management Alternate directr: Stand in at bard meeting fr directr when unavailable Nt merely an agent f the directr but has n pwers when directr is present Nminee directr: Appinted by specific grup r bdy (hlding c, emplyees, creditr) t versee bard

3 Fr duties see par (may act in nminatr s interest unless that cnflicts with interests f c) Functins and pwers f the Bard Bard sets the directin f the cmpany and hlds management accuntable Pwers are determined by replaceable rules (RR), cmpany s cnstitutin (if it has ne) and Crpratins Act Respnsibility f bard See list n page See figure 12.1 fr pwers Management pwers S 198A (RR) states that the business f a cmpany is t be managed by directrs Brad pwer which can include changing the directin f a cmpany r selling the nly business carried n by it Strng: Directrs DO NOT have t get sharehlders apprval t sell Hwever under ASZ Listing Rules sharehlder apprval is required if a listed cmpany prpses t make significant change t the nature/scale f its activities Sharehlders cannt verride management Sharehlders cannt invlve themselves in the management f the cmpany Autmatic Self- Cleansing Filter Syndicate C v Cunninghame (1906) Facts: Directrs were rdered by general meeting f members t sell the cmpany s prperty Directrs refused, relying n cnstitutin Held: Cnstitutin gave management pwers t the bard f directrs including pwer t sell prperty. Members culd nt interfere as they were cntractually bund by the cnstitutin Separatin f wnership and cntrl in c Ownership vests in sharehlders Cntrl vests in bard Bard prcedure Directr s meetings Decisins are made and reslutins passed Rules gverning meetings are set ut in replaceable rules (RR) S 248G (RR): reslutins passed by a majrity f vtes and Chair has casting vte if necessary( s 248 G(2) ) All directrs MUST receive reasnable ntice that a meeting is t take place BUT if meetings are usually held at regular fixed dates, there is n need fr ntice May pass reslutin withut meeting (S 248A) Signed statement by all directrs that they are in favur f reslutin Adpted when last directr signs

4 Directrs may use separate dcuments as lng as wrding f reslutin and statement is same Same ges fr sle directr f single directr prprietary c Just recrds and signs reslutin Ntice f meeting Reasnable ntice t every directr (S 248C) (RR) Clear and full summary f business t be discussed Otherwise prceedings f meeting may be vid (Jenashare Pty Ltd) Qurum S 248F (RR) - 2 directrs entitled t vte n the relevant matters and they MUST be present thrugh ut the whle meeting Cnflicted directr nt cunted twards qurum Cnstitutin may allw fr nly 1 (Gsfrd Christian Schl Ltd) Mancini v Mancini (1999) Facts: Divrced husband and wife were the nly directrs f 3 cmpanies. Wife wanted t remve husband as directr at meetings where husband was nt present and made reslutin t d s Held: Reslutin invalid due t lack f qurum as cnstitutin prvided fr a qurum f 2 Minutes S 251A (1) (b) - Prceedings and reslutins f meetings MUST be recrded in the minute bk and the Chair must sign the bk within a reasnable time fllwing the meeting Sub-cmmittees Bard may delegate functins t sub-cmmittees Delegatin must be recrded in minute bk (s 251A) Audit Remuneratin Nminatin Appintment f directrs Public cmpany must have 3 directrs, prprietary cmpany 1 At least 1 directr (prprietary cmpany) and 2 directrs (public cmpany) must be rdinarily resident in Australia Only natural persns abve the age f 18 (s 201B) Althugh anther c (e.g. hlding c) may be shadw directr, it may nt be appinted as a directr Directr may als be cmpany secretary N statutry share qualificatin may be stipulated by cnstitutin Cannt be appinted withut cnsent Cmpany must receive and retain signed cnsent frm (S 201D)

5 Des nt need t ldge it with ASIC Ldge ntice f persnal details (name, date and place f birth, address) with ASIC within 28 days after appintment (directr, alternate directr and secretary) Ntify ASIC f any change in persnal details Disqualificatin Autmatic OR By Curt (upn applicatin) OR By ASIC Designed t prtect public frm persns wh: Cmmitted serius ffences Cmmitted ffences relating t the prmtin r management f crpratins Invlved in failed crpratins With a recrd f bankruptcy r failure t cmply with schemes f arrangement r cmpsitin Rich v ASIC (2005) ACSR 242; ASIC v Vizard [2005] FCA 1037: Prtect Punishment Deter Disqualified persn cmmits an ffence if s/he(s 206A(1)): Make r participates in making f decisin that affects the whle r a substantial part f the business f the cmpany Exercise the capacity t affect significantly the crpratin s financial standing Acts as a shadw directr (cmmunicates instructins r wishes that directrs nrmally implement - r intending them t implement them) CAC v Bracht: Mre than mere clerical r administrative acts but need nt invlve the exercise f cntrl negtiating credit facilities n behalf f c may suffice Autmatic disqualificatin S 206B(1) disqualified if cnvicted n indictment f ffence: Cncerning making r participatin in making f decisin that affect the whle r a substantial part f the business f the cmpany OR Cncerning an act that has the capacity t affect significantly the crpratin s financial standing OR That is a cntraventin f the Act and is punishable by imprisnment fr mre greater than 12 mnths OR Invlving dishnesty and punishable by imprisnment fr at least 3 mnths OR Against the laws f a freign cuntry punishable by imprisnment fr a perid greater than 12 mnths Perid: 5 years frm date f cnvictin (if n imprisnment) 5 years frm date f release (if imprisned) May be extended by Curt n ASIC s applicatin fr up t an additinal 15 years s 206BA

6 Regime extends t undischarged bankrupts (see next slide) and directrs disqualified by freign curt rder Undischarged bankrupt Including persns wh entered int a persnal inslvency agreement under Part X f the Bankruptcy Act 1966 (Cth) and failed t fulfill the related bligatins Perid: Until discharged r Curt permits persn t act (upn applicatin) Sle sharehlder/directr? Trustee may appint smene t act as directr Disqualificatin by Curt On applicatin by ASIC in fur cases When? A Cntraventin f civil penalty prvisin f Act (inslvent trading, insider trading, directrs duties etc) AND Curt is satisfied that disqualificatin is justified (s 206C) Disqualificatin fr perid Curt cnsiders apprpriate B Officer f tw r mre cmpanies in past 7 years that were inslvent r failed t pay their debt (s 206D): Curt is satisfied that the manner in which crpratin was managed was whlly r partially respnsible fr failure and that disqualificatin is justified Disqualificatin fr up t 20 years When? (cnt) C Repeated cntraventin f Act (s 206E) Twice been fficer f crpratin cntravening Act and each time persn failed t prevent it; OR The persn cntravened Act at least twice while an fficer, OR While an fficer f a bdy crprate did smething that wuld have cnstituted a cntraventin f ss 180 r 181 f Act if bdy was a cmpany Curt must be satisfied that disqualificatin is justified Disqualificatin fr perid Curt cnsiders apprpriate UNLIKE autmatic disqualificatin, there is n fixed duratin f disqualificatin D Disqualificatin under law f freign jurisdictin (s 206EAA Santw J in ASIC v Adler (2002) set ut factrs which have led t the lngest perids f disqualificatin: large financial lsses high likelihd that persn will cntinue t engage in similar cnduct activities caused r had ptential t cause great harm lack f cntritin r remrse disregard fr the law dishnesty and an intentin t defraud previus cntraventins