How Do I Go About Appointing or Removing Officers From a Registered Company?

The appointment and removal of company officers is covered by Part 2D of the Corporations Act 2001. Here is a brief overview of the process involved in appointing and removing company officers.

Let’s start by exploring what a company officer is. Officers are usually appointed by the company’s board of directors and are given power by the board to run different aspects of the business. Officers usually include the president, secretary and treasurer. Modern companies also have officers with titles such as chief executive officer, chief financial officer etc. officers are generally appointed and removed at the discretion of the company’s directors. Directors may also serve as officers and officers can also be employees of the organisation.

To appoint officers to a newly-registered Australian company, the directors will, subject to the company’s constitution, need to pass a resolution. Officers (and directors) need to give their written consent in order to take up their positions within the company. A copy of the office holder’s written consent must be kept by the company and ASIC must be informed of the appointment.

Once the company is established, additional directors or an additional secretary can be appointed (again subject to the company’s constitution and other binding rules and agreements) by a directors’ resolution or a members’ resolution. The person must give their written consent, a copy of which needs to be kept by the company and ASIC needs to be informed of the appointment.

If an office holder wishes to resign from their position (or is removed), ASIC Forms 370 and 484 must be lodged with ASIC, by the person(s) resigning and by the company. In general terms, an officer is removed from their position by a members’ resolution.

An ASIC Form 484 (Change of Company Details) must contain:

• For an appointment – the full name, residential address, date of birth, place of birth and date of appointment; and
• For a resignation or removal – the name of person who has resigned or been removed, the position resigned from or from which the person has been removed and the date of  resignation or removal.

The form must be lodged within 28 days of the change of officers. A lodgement fee will not be payable unless the 28-day timeframe is not adhered to. In which case, late fees will be charged.

A retiring or resigned officer must lodge an ASIC Form 370: Notification by officeholder of resignation or retirement. The form must be accompanied by a copy of the letter of resignation and the form must contain:

(a) Company details;

(b) Officeholder details; and

(c) Resignation or retirement details.

 

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What Processes Must be Adhered to When Holding a Director’s Meeting for an Australian Company?

A directors’ meeting may usually be called by any individual director by giving notice of the proposed meeting to every other director. This, of course, is subject to the requirements of either the Replaceable Rules within the Corporations Act of 2001 or within the company’s own constitution.

A quorum is required for a directors’ meeting to take place and minutes must be recorded.

The period of notice that needs to be given before a directors’ meeting can be held and the form that notice may take will either be dictated by the company’s constitution, the Replaceable Rules or a combination of both.

Section 248C of the Corporations Act, which is the Replaceable Rule for the calling of directors’ meeting merely states that the period of notice to be given must be ‘reasonable’.

In terms of the number of directors required to hold a meeting, or the ‘quorum’, the Replaceable Rules (as per Section 248F of the Corporations Act) states that “unless the directors determine otherwise, the quorum for a directors’ meeting is two directors and the quorum must be present at all times”.

A resolution of the directors must be passed by a majority of votes cast by those directors who are entitled to vote on the resolution.

The chair has the casting vote, if necessary, in addition to any vote they have as a director.

The directors may elect a director to chair their meetings. They may also determine the period for which the director is to be the chair.

If, at the time of a directors’ meeting, they have not already appointed a chair, or a previously-elected chair is not available or declines to act, the directors must elect a member who is present to chair the meeting.

Directors may also pass a resolution without holding a meeting. To do so, all directors who are entitled to vote must sign a document containing a statement that they are in favour of the resolution set out in the document.

Separate copies of the document may be used for signing by different directors so long as the wording of the resolution and the statement is identical on each copy.

The resolution is passed when the last director signs the document.

Single-director proprietary companies have different rules that must be adhered to for passing resolutions.

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What are The Main Duties and Responsibilities of Company Directors?

Becoming the director of a registered company involves taking on certain legal obligations and duties, spelt out in the Corporations Act. The purpose of these legal obligations and duties is to protect all parties: members of the public, the company, its creditors and shareholders.

A company director, for example, can be held liable for a company’s debts at a time when the incorporated entity was unable to pay those debts as, and when, they fell due. If a director breaches certain if his or her duties, he/she will be liable to compensate the company for any losses suffered as a result of those breaches.

In some cases, a company director can also be personally liable for civil and criminal penalties and for losses incurred by the company when acting as a trustee for a trust.

If a company seeks credit from a commercial lender, that lender will often require a personal guarantee from company directors before granting the loan. This means that if the company defaults on the loan, the personal assets of the director may be put at risk.

It is such financial risks faced by directors that make some of their core responsibilities so essential. For instance, it makes good sense that directors must act diligently to control the financial affairs of the company and ensure that it only incurs debts that it is capable of paying.

It is always recommended that, as a company director, you seek expert legal advice before entering a loan agreement or signing any personal guarantees for the liabilities of the company. Fundamentally, a company is reliant on its directors carrying out their duties to ensure it is able to run properly.

The Replaceable Rules (as set out under Corporations Law) or the company’s own Constitution set out the rules by which directors are charged with taking responsibility for the company’s affairs and management. The only time the director’s authority can be overridden is at a general meeting, as set out by the Corporations Act or within the Replaceable Rules or Constitution.

In the event of a general meeting, it is the director’s responsibility to keep written records of meeting minutes and resolutions made.

You must be 18 years of age to become a company director. If you are the company’s sole director, you must reside in Australia. If the company has more than one director, then at least one director must ordinarily live in Australia.

Before becoming a director, you must give your written consent to do so. That written consent must be kept on file by the company and ASIC must be notified of your appointment.

If you have previously breached the Corporations Act, ASIC or a court can stop you from becoming a director. If you have a criminal record, or if you’re bankrupt, you will need the special permission of the court to become a company director.

The five core duties that a director has are:

1. To act in good faith in the best interest of the company
2. To act with care and diligence
3. Not to use information obtained in performing your role as director
4. To avoid conflicts of interest
5. To prevent the company from trading while insolvent

What does it mean to be a ‘Member’ of an Australian Proprietary Company?

In simple terms, the members of a company are its owners. All companies must have at least one member. A private or proprietary company cannot have more than 50 members that are not employees of the company. Public companies, those listed on the stock exchange, can have as many members are they wish.

There’s no minimum age set out in Australian corporations law for becoming a member of a company but there are certain ‘entities’ than can and cannot be members of a company according to the Corporations Act 2001. A company’s constitution can also set a minimum age for membership.

According to the Corporations Act, the following can be company members:

1. A person
2. A body corporate
3. A body politic

A member must be “an entity that can own property, sue or be sued. That means the following cannot be company members:

1. A business name
2. Estates and
3. Trusts

Estates and trusts need to nominate an executor or a trustee to hold shares in a company on their behalf; they can’t hold them in their own right.

Even though a company is owned by its members, it still has its own separate legal existence and the assets of a company belong to it, not to its members.

A company’s members are not liable for the debts of the company. A member’s only financial commitment is to pay any amount to the company that’s unpaid on your shares it you’re required to do so. Members may be required to contribute to the cost of winding up a company if it is not limited by shares.

Members can make decisions about a company by passing resolutions. This is usually done at a meeting of members.

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What are The Important Issues to Consider When Holding Directors Meetings?

The Important Issues to Consider When Holding Directors Meetings?

 

The first thing to do when calling a meeting of directors is to make sure you understand the process required. This process will be set out in your company’s rules: either your constitution or the Replaceable Rules contained in the Corporations Act.

It is also sensible to consult any other binding documents, including binding shareholder agreements to ensure any meeting is carried out lawfully.

Usually any director of a company can call a meeting of directors simply by notifying every other director. The constitution or Replaceable Rules will spell out the notice period that must be given to directors before such a meeting can be held.

A quorum of directors will need to be present before the meeting can be considered legitimate. The exact number required for a quorum will, again, be spelt out in the company’s official rules and binding documents.

The constitution or replaceable rules will also spell out the means by which a meeting can be attended ie via phone, video linkup etc.

Minutes must be taken at all directors’ meetings. The chairman must sign the minutes and they should be inserted into the Company Register.

The company’s rules/constitution may also allow directors to pass a resolution without meeting. This can be done by circulating a document or copy of a document to each director. Each director must sign the document and the resolution will be passed on the date that the last director signs.

For more information and guidance about how to hold directors’ meetings, we suggest you consult Chapter 2G, Part 2G.1 of the Corporations Act.

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Do You have a Unique Constitution for a Online Company Registration?

What are the Replaceable Rules and are they as good as having a unique constitution for a company?

A company can be governed by its own constitution or by the Replaceable Rules – standard rules set out in the Corporations Act, 2001. The Replaceable Rules are a good starting point for ensuring that a company is governed in accordance with Australian company law. However, amending the Rules or having a unique constitution drawn up for your company can provide more flexibility to directors and shareholders.

Section 141 of the Corporations Act sets out the provisions that apply as Replaceable Rules. These provisions are comprehensive and cover everything from how directors should behave if a matter is put to the vote in which he/she has a personal interest, through to powers of directors, directors meetings, meetings of members and provisions that relate to the company’s shares.

If a company has a sole member/director, it must have its own constitution and cannot use the Replaceable Rules. Public companies “Limited by Guarantee” must also be governed by their own constitution, likewise, “no Liability” public companies and special purpose companies.

Some corporate legal experts argue that it is better for a company to have its own constitution than to rely on the Replaceable Rules. For example, a constitution can be drafted to enable the company to issue several different classes of shares, dividend rights and rights to capital in the event that the company is wound up.

A constitution also gives company members and directors the opportunity to draft more comprehensive rules about matters such as the holding of meetings and voting rights, than are currently available in the Replaceable Rules.

A third, and perhaps more sensible option, is for a company to make the Replaceable Rules its starting point but selecting to amend some of the provisions set down in Section 141 to better suite its purposes. This amended version of the Replaceable Rules then becomes the company’s constitution.

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