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英文代写-WEEK 3 TOPIC
时间：2022-01-13
COMPANIES AND SECURITIES
LAW
77947
Week 3
1
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
2
MAIN ORGANS OF THE COMPANY
¢ The board of directors
¢ The members in the general meeting
3
POWER OF THE BOARD OF DIRECTORS
¢ The business of a company is to be managed by
or under the direction of the directors: s 198A
Except those powers expressly reserved for the general
meeting
The directors may exercise all the powers of the
company except any powers that this Act or the
company’s constitution (if any) requires the company to
exercise in general meeting.
The management power is incredibly broad, and can
cover most actions: Strong v Brough & Son (LHW 12.75)
Directors can also delegate management power – s 198D
4
DIRECTORS
¢ All companies must have at least 1 director
¢ Every public co must have at least 3 directors
(with at least 2 ordinarily residing in Australia):
s 201A(2)
¢ Role is to manage, or supervise the management
of, the business of the co
¢ Australian listed companies’ have, on average,
9.84 directors (the majority being non-executive)
5
DEFINITION OF DIRECTOR
¢ Definition in s 9 includes the following as
directors.
Person officially appointed director [with their consent]
by the company
Persons who act in the position, even though not validly
appointed [‘de facto directors’], e.g., a person acting
under a defective appointment but are part of the
governing structure; and
Persons (including other companies) who exercise
directorial control but who are not officially appointed
as directors [‘shadow directors’].
¢ This definition only applies for all purposes of the
Act, except where the contrary intention applies 6
TYPES OF DIRECTORS (1)
¢ Executive director: someone employed (full-time ?) to
manage part of the business
Managing director: an executive director who is in
charge of day-to-day management of the company.
Governing director: found in small proprietary co’s
and family business with extensive management powers
¢ Non-Executive director (NED): not involved in full-
time management and are not employees of co. They
will attend board meetings and those committees to
which they are appointed
¢ Affiliated NED: one that is not Independent
¢ Independent NED: on that fulfils ASX Corporate
Governance Principles and Recommendations 3rd ed (see
next slide)
7
TYPES OF DIRECTORS (2)
¢ Independent Director is an NED that is not a
substantial shareholder of the company, a material
supplier or customer of the company, have a material
contractual relationship with the co or another group
member, be a material professional advisor/consultant to co
or another group member
¢ Chairperson: elected by directors to chair their meetings
and sign minutes (records) of the meetings. Also chairs the
general meeting. Could be executive or non-executive
¢ Nominee directors: are persons appointed to represent
the interests of a particular group or another person (e.g.
employees or creditors). Usually, but not always, an NED.
¢ Alternate directors: are a temporary substitute
appointed to cover another directors who is absent because
of illness or other commitments
8
SENIOR MANAGEMENT
¢ The management of all or part of the company may be
delegated to employed managers, who may or may not be
members of the board.
Chief Executive Officer (CEO): a common title for the
most senior person within the management structure,
who is in charge of day-to-day management. If they are
also a director, they are usually called a “Managing
Director” (MD).
Chief Financial Officer (CFO), Chief Operations Officer
(COO): common titles for the senior persons responsible
for financial or operational matters, usually answerable
only to the CEO or MD (although a CFO might be
answerable to a COO)
Other “C-level” officers 9
COMPANY “OFFICERS”
¢ In addition to “directors”, the Corporations Act
makes all “officers” subject to various duties and
obligations. “Officers” includes:
Each director and company secretary
A decision maker or participant in decisions affecting
the whole, or a substantial part of the business (not just
central administration); or
Person with capacity to affect significantly company’s
financial standing; or
Person whose instructions or wishes the directors are
accustomed to act (excluding professionals)
Certain persons appointed under last relating to
external administration (e.g., administrators, receivers,
liquidators) 10
COMPANY SECRETARY
¢ A type of officer recognised in the Act.
Compulsory for public companies, optional for
proprietary companies
Must (or, if more than one, at least one must) reside in
Australia
Appointed by directors
Must be at least 18 years old
Cannot (without consent of ASIC) be disqualified
¢ Functions: Various administrative functions
recognised in the Act, including ensuring the
company has a registered office and lodging
various notices
See LHW 12.360 for full list
11
KEY MANAGEMENT PERSONNEL
¢ In addition to the terms “director” and “officer”, the term
“Key management personnel” is important.
¢ The term is in relation to remuneration reports (see later).
It includes, but is not limited to, directors.
¢ Term is defined in accounting standards to include
“persons having authority and responsibility for planning,
directing and controlling the activities of the entity,
directly or indirectly, including any director”.
12
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
13
HOW DO DIRECTORS EXERCISE
THEIR POWERS?
¢ In a regular properly called meeting (by notice)
and making decisions by passing resolutions
¢ Informally meeting together (by notice) and
agreeing to the decision BUT directors must be
aware that the occasion is to be a directors’
meeting: Petsch v Kennedy (discussed in LHW
12.100)
¢ Without meeting by passing a circulating
resolution. This requires unanimous consent
¢ For companies with one director: passing a
resolution (signing a document titled
“resolution”)
14
MEETINGS OF DIRECTORS (1)
¢ Who can call a meeting? Any director (RR)
¢ How much notice can be given? Reasonable
notice given to all directors (RR), can be
dispensed with (RR)
¢ What must be contained in notice? Clear and full
summary of business to be dealt with.
¢ Use of technology: need consent of all directors
(RR), and director can only withdraw consent
with reasonable time (RR)
¢ Quorum (i.e., minimum attendance): at least 2
(RR)
15
MEETINGS OF DIRECTORS (2)
¢ Passing resolutions – by majority of votes cast by
directors at the meeting entitled to vote
Deadlock
Casting vote - Chair
¢ Minutes of the meeting:
§ Records proceedings and resolutions
§ Signed by the Chair
§ Evidence of what went on in the meeting
16
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
17
WHO CAN BE APPOINTED?
¢ Person must satisfy 4 requirements under the
Corporations Act – person must:
consent to appointment (s 201D)
be at least 18 years old (s 201B(1))
be an individual and not a company (s 201B(1)
not be disqualified from being a director (e.g., must not
be a bankrupt or be convicted for certain offences under
the Corporations Act)
18
APPOINTMENT OF DIRECTORS
¢ Initial directors: included in application for registration of
company
¢ Subsequent appointments rules: by General Meeting – s
201G (RR)
¢ Casual vacancies: by directors (RR)
¢ Where there is sole shareholder, by that shareholder or by
legal personal representative
¢ Share qualification: if constitution requires
19
REMOVAL OF DIRECTORS
¢ Resignation: at any time by giving written
notice (RR);
¢ Removal by general meeting of shareholders:
In proprietary company: RR
In public company: per s 203D, via ordinary
resolution, after giving 2 months notice of the
meeting to the director. The director is
entitled to attend the meeting to present case.
Resolution does not take effect until a
successor is appointed.
¢ See last week on impact on service contracts
20
REMOVAL OF DIRECTORS (2)
¢ In accordance with Constitution. However, for public
companies:
Cannot change directors’ rights under 203D
Majority of board cannot remove a director unless
shareholders agree: 203E
¢ Disqualification by Court or ASIC
21
DISQUALIFICATION OF DIRECTORS:
PART 2D.6
¢ Purpose:
Protect shareholders and the public generally
Punish the offender
Deter improper behaviour
¢ Disqualified from managing a corporation:
Make or participate in making decisions effecting company as
a whole
Exercise capacity to significantly affect financial standing
Communicate instructions or wishes to directors, knowing
they will follow them
¢ Leave to manage can be granted by the court: s 206G (see LHW
12.260)
¢ Managing while disqualified is an offence, and can also be
personally liable for some debts: see LHW 12.265
22
GROUNDS FOR DISQUALIFICATION
¢ Automatic disqualification:
Undischarged bankrupts: until discharged
Convicted persons: five years from date of conviction or, if
imprisoned, from being released
Disqualification under a law of a foreign jurisdiction: while
remain so disqualified
¢ On application to court, on application of ASIC, for such
period as court considers appropriate
See next slide
¢ By ASIC directly:
Director of at least two failed companies in last seven years
ASIC serves notice on person
Maximum period of 7 years 23
COURT ORDERED
DISQUALIFICATION
¢ Grounds
Repeated (i.e., two) contraventions of the Corporations Act –by
company (and did not take reasonable steps to prevent this), or
personally
Contravention of a civil penalty provision
Directors of two or more insolvent companies and the court is
satisfied that the manner in which it was managed was such
that warranted disqualification: maximum of 20 years
¢ Factors in determining period (LHW 12.225):
Large financial losses; great harm to public
Likelihood of repeat; previous contraventions
(Lack of) contrition and remorse
Disregard for law; dishonesty or intention to defraud 24
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
25
REMUNERATION OF DIRECTORS
¢ Fixing remuneration
Paid by resolution of company (RR)
Constitution may allow directors to fix remuneration:
¢ Common for MDs
Excessive remuneration may be oppressive (Week 10),
or voidable by liquidator (Week 12)
26
DISCLOSURE OF REMUNERATION
¢ Unlisted companies – disclosure in financial
statements of compensation paid to key
management personnel. Includes:
Short term employee benefits (wages, salary, bonuses
payable within 12 months after year end)
Post employment benefits
Other long term benefits (e.g., long service leave)
Termination benefits
Share based payments
¢ Listed companies: more extensive disclosure
required under Act and under ASX Listing Rules
Required to have a “Remuneration Report” under s
300A
27
REMUNERATION REPORT
¢ Contents:
Board policy on determination of nature and amount of
remuneration (for company, or for consolidated group)
Relationship between remuneration policy and company
performance
Which element of remuneration is dependant on
satisfaction of performance condition, and details of that
condition
Full disclosure of remuneration similar to unlisted
companies (see LHW 12.310)
¢ Non-binding resolution of whether to approve Report
Two strikes and re-election: 25% vote against Report in
two consecutive years, directors must go for re-election
(“spill resolution”) 28
OTHER DISCLOSURE
REQUIREMENTS
¢ Other ASX rules on remuneration:
continuous disclosure of remuneration affecting share
price, e.g., CEO remuneration, issue of equity securities
¢ At request of shareholders:
5% or 100 shareholders
Related party transactions (Week 8)
¢ Margin loans
29
TERMINATION PAYMENTS AND
BENEFITS (1)
¢ Termination payment is defined as being given in
connection with retirement or removal from person’s office
¢ Includes given property
¢ Look at substance of payment
¢ Office is managerial or executive. Includes directors and
other key management personnel.
¢ Shareholder approval by ordinary resolution is required
Non binding resolution of remuneration report is not
enough
¢ If breach, amount is held on trust and required to be
refunded
Also subject to penalty
30
TERMINATION PAYMENTS AND
BENEFITS (2)
¢ Exemptions:
Damages for beach of contract, or under agreement
made before taking up office, or under industrial award.
But cannot exceed 1 year’s salary (averaged over 3 year)
Genuine pension/lump sum payments (subject to
statutory maximum)
¢ Also prohibited from receiving benefits in connection with
transfer of whole or part of undertaking or property of
company
31
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
32
DIRECTORS’ DUTIES
¢ The law imposes duties on directors to ensure
that they do not take advantage of their position.
These duties are imposed by:
Common law (duty of care)
Equity (fiduciary duties and others)
Statute
¢ Function
Protect shareholders from risk of harm to co or
its property
Make directors accountable for harm or
mismanagement
Maintain loyalty and trust 33
OVERVIEW
Directors’
duties
Types of
directors
Legal
definitio
n s9
Content
and
application
Breach
and
consequences
SOURCE OF DUTIES AND REMEDIES
¢ Duties:
Good faith, proper purpose (general law, statute)
No conflict rule, secret profits rule (general law)
Duty of skill, care and diligence (general law, statute)
Improper use of position, improper use of information
(statute)
Insolvent trading, other disclosure rules (statute)
¢ Remedies – breaches of general law duties
Damages (common law), equitable compensation
Account of profits, constructive trust
Rescission of contract
Injunction
¢ Remedies – breaches of statute
Civil penalties: fines, compensation, disqualification
Criminal penalties 35
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
36
DIVISION OF CORPORATE POWER
¢ The Act (s 198A) gives broad management powers to the
board of directors
¢ Board’s function and powers are extensive: see figure 12.1
and Table 12.1 in LHW, on functions and powers of the
board.
¢ At common law, members cannot override/interfere with
board decisions
Automatic Self-Cleansing v Cuninghame (LHW 12.85)
John Shaw v Shaw (LHW 12.90)
• Members rights are limited
• Alter constitution to restrict director’s powers, or,
s198A , or
• Remove directors
37
CORPORATE GOVERNANCE
• “Definition”:
• Rules and practices put in place within a company to
deal with relationship between directors, management,
shareholders and other stakeholders
• Not a legal term
• Mechanisms to ensure board is accountable and
controlled
• Main regulatory sources of rules:
• Legal obligations of Corporations Act and fiduciary
duties (e.g., directors’ duties)
• ASX Listing Rules, accounting and auditing standards
• Codes of corporate governance
38
ASX CORPORATE GOVERNANCE
LISTING RULES
• Solid foundations for management and oversight
• Establish roles and functions of board and management
(LHW 14.35)
• Structure board to add value
• Independent directors, independent Chair, define board
skills, board diversity
• Act ethically and responsibly: code of conduct
• Safeguard integrity of reporting
• Make timely and balanced disclosure: continuous
disclosure
• Respect rights of security holders
• Recognise and manage risks (LHW 14.70)
• Remunerate fairly and responsibly (LHW 14.80) 39
COMMITTEES OF THE BOARD
¢ A sub-group of the directors who have been delegated
certain functions of the board
¢ Ensures certain matters are given full attention by at least
part of the board
¢ ASX rules on corporate governance recognise a number of
committees:
Audit committee: Deals directly and independently with
internal and external auditors, reviews financial risk
and systems of internal control, considers company’s
accounting policies and significant transactions
Nomination committee: nominate new members to
board
Risk committee
Remuneration committee
40
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
41
LAW
77947
Week 3
1
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
2
MAIN ORGANS OF THE COMPANY
¢ The board of directors
¢ The members in the general meeting
3
POWER OF THE BOARD OF DIRECTORS
¢ The business of a company is to be managed by
or under the direction of the directors: s 198A
Except those powers expressly reserved for the general
meeting
The directors may exercise all the powers of the
company except any powers that this Act or the
company’s constitution (if any) requires the company to
exercise in general meeting.
The management power is incredibly broad, and can
cover most actions: Strong v Brough & Son (LHW 12.75)
Directors can also delegate management power – s 198D
4
DIRECTORS
¢ All companies must have at least 1 director
¢ Every public co must have at least 3 directors
(with at least 2 ordinarily residing in Australia):
s 201A(2)
¢ Role is to manage, or supervise the management
of, the business of the co
¢ Australian listed companies’ have, on average,
9.84 directors (the majority being non-executive)
5
DEFINITION OF DIRECTOR
¢ Definition in s 9 includes the following as
directors.
Person officially appointed director [with their consent]
by the company
Persons who act in the position, even though not validly
appointed [‘de facto directors’], e.g., a person acting
under a defective appointment but are part of the
governing structure; and
Persons (including other companies) who exercise
directorial control but who are not officially appointed
as directors [‘shadow directors’].
¢ This definition only applies for all purposes of the
Act, except where the contrary intention applies 6
TYPES OF DIRECTORS (1)
¢ Executive director: someone employed (full-time ?) to
manage part of the business
Managing director: an executive director who is in
charge of day-to-day management of the company.
Governing director: found in small proprietary co’s
and family business with extensive management powers
¢ Non-Executive director (NED): not involved in full-
time management and are not employees of co. They
will attend board meetings and those committees to
which they are appointed
¢ Affiliated NED: one that is not Independent
¢ Independent NED: on that fulfils ASX Corporate
Governance Principles and Recommendations 3rd ed (see
next slide)
7
TYPES OF DIRECTORS (2)
¢ Independent Director is an NED that is not a
substantial shareholder of the company, a material
supplier or customer of the company, have a material
contractual relationship with the co or another group
member, be a material professional advisor/consultant to co
or another group member
¢ Chairperson: elected by directors to chair their meetings
and sign minutes (records) of the meetings. Also chairs the
general meeting. Could be executive or non-executive
¢ Nominee directors: are persons appointed to represent
the interests of a particular group or another person (e.g.
employees or creditors). Usually, but not always, an NED.
¢ Alternate directors: are a temporary substitute
appointed to cover another directors who is absent because
of illness or other commitments
8
SENIOR MANAGEMENT
¢ The management of all or part of the company may be
delegated to employed managers, who may or may not be
members of the board.
Chief Executive Officer (CEO): a common title for the
most senior person within the management structure,
who is in charge of day-to-day management. If they are
also a director, they are usually called a “Managing
Director” (MD).
Chief Financial Officer (CFO), Chief Operations Officer
(COO): common titles for the senior persons responsible
for financial or operational matters, usually answerable
only to the CEO or MD (although a CFO might be
answerable to a COO)
Other “C-level” officers 9
COMPANY “OFFICERS”
¢ In addition to “directors”, the Corporations Act
makes all “officers” subject to various duties and
obligations. “Officers” includes:
Each director and company secretary
A decision maker or participant in decisions affecting
the whole, or a substantial part of the business (not just
central administration); or
Person with capacity to affect significantly company’s
financial standing; or
Person whose instructions or wishes the directors are
accustomed to act (excluding professionals)
Certain persons appointed under last relating to
external administration (e.g., administrators, receivers,
liquidators) 10
COMPANY SECRETARY
¢ A type of officer recognised in the Act.
Compulsory for public companies, optional for
proprietary companies
Must (or, if more than one, at least one must) reside in
Australia
Appointed by directors
Must be at least 18 years old
Cannot (without consent of ASIC) be disqualified
¢ Functions: Various administrative functions
recognised in the Act, including ensuring the
company has a registered office and lodging
various notices
See LHW 12.360 for full list
11
KEY MANAGEMENT PERSONNEL
¢ In addition to the terms “director” and “officer”, the term
“Key management personnel” is important.
¢ The term is in relation to remuneration reports (see later).
It includes, but is not limited to, directors.
¢ Term is defined in accounting standards to include
“persons having authority and responsibility for planning,
directing and controlling the activities of the entity,
directly or indirectly, including any director”.
12
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
13
HOW DO DIRECTORS EXERCISE
THEIR POWERS?
¢ In a regular properly called meeting (by notice)
and making decisions by passing resolutions
¢ Informally meeting together (by notice) and
agreeing to the decision BUT directors must be
aware that the occasion is to be a directors’
meeting: Petsch v Kennedy (discussed in LHW
12.100)
¢ Without meeting by passing a circulating
resolution. This requires unanimous consent
¢ For companies with one director: passing a
resolution (signing a document titled
“resolution”)
14
MEETINGS OF DIRECTORS (1)
¢ Who can call a meeting? Any director (RR)
¢ How much notice can be given? Reasonable
notice given to all directors (RR), can be
dispensed with (RR)
¢ What must be contained in notice? Clear and full
summary of business to be dealt with.
¢ Use of technology: need consent of all directors
(RR), and director can only withdraw consent
with reasonable time (RR)
¢ Quorum (i.e., minimum attendance): at least 2
(RR)
15
MEETINGS OF DIRECTORS (2)
¢ Passing resolutions – by majority of votes cast by
directors at the meeting entitled to vote
Deadlock
Casting vote - Chair
¢ Minutes of the meeting:
§ Records proceedings and resolutions
§ Signed by the Chair
§ Evidence of what went on in the meeting
16
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
17
WHO CAN BE APPOINTED?
¢ Person must satisfy 4 requirements under the
Corporations Act – person must:
consent to appointment (s 201D)
be at least 18 years old (s 201B(1))
be an individual and not a company (s 201B(1)
not be disqualified from being a director (e.g., must not
be a bankrupt or be convicted for certain offences under
the Corporations Act)
18
APPOINTMENT OF DIRECTORS
¢ Initial directors: included in application for registration of
company
¢ Subsequent appointments rules: by General Meeting – s
201G (RR)
¢ Casual vacancies: by directors (RR)
¢ Where there is sole shareholder, by that shareholder or by
legal personal representative
¢ Share qualification: if constitution requires
19
REMOVAL OF DIRECTORS
¢ Resignation: at any time by giving written
notice (RR);
¢ Removal by general meeting of shareholders:
In proprietary company: RR
In public company: per s 203D, via ordinary
resolution, after giving 2 months notice of the
meeting to the director. The director is
entitled to attend the meeting to present case.
Resolution does not take effect until a
successor is appointed.
¢ See last week on impact on service contracts
20
REMOVAL OF DIRECTORS (2)
¢ In accordance with Constitution. However, for public
companies:
Cannot change directors’ rights under 203D
Majority of board cannot remove a director unless
shareholders agree: 203E
¢ Disqualification by Court or ASIC
21
DISQUALIFICATION OF DIRECTORS:
PART 2D.6
¢ Purpose:
Protect shareholders and the public generally
Punish the offender
Deter improper behaviour
¢ Disqualified from managing a corporation:
Make or participate in making decisions effecting company as
a whole
Exercise capacity to significantly affect financial standing
Communicate instructions or wishes to directors, knowing
they will follow them
¢ Leave to manage can be granted by the court: s 206G (see LHW
12.260)
¢ Managing while disqualified is an offence, and can also be
personally liable for some debts: see LHW 12.265
22
GROUNDS FOR DISQUALIFICATION
¢ Automatic disqualification:
Undischarged bankrupts: until discharged
Convicted persons: five years from date of conviction or, if
imprisoned, from being released
Disqualification under a law of a foreign jurisdiction: while
remain so disqualified
¢ On application to court, on application of ASIC, for such
period as court considers appropriate
See next slide
¢ By ASIC directly:
Director of at least two failed companies in last seven years
ASIC serves notice on person
Maximum period of 7 years 23
COURT ORDERED
DISQUALIFICATION
¢ Grounds
Repeated (i.e., two) contraventions of the Corporations Act –by
company (and did not take reasonable steps to prevent this), or
personally
Contravention of a civil penalty provision
Directors of two or more insolvent companies and the court is
satisfied that the manner in which it was managed was such
that warranted disqualification: maximum of 20 years
¢ Factors in determining period (LHW 12.225):
Large financial losses; great harm to public
Likelihood of repeat; previous contraventions
(Lack of) contrition and remorse
Disregard for law; dishonesty or intention to defraud 24
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
25
REMUNERATION OF DIRECTORS
¢ Fixing remuneration
Paid by resolution of company (RR)
Constitution may allow directors to fix remuneration:
¢ Common for MDs
Excessive remuneration may be oppressive (Week 10),
or voidable by liquidator (Week 12)
26
DISCLOSURE OF REMUNERATION
¢ Unlisted companies – disclosure in financial
statements of compensation paid to key
management personnel. Includes:
Short term employee benefits (wages, salary, bonuses
payable within 12 months after year end)
Post employment benefits
Other long term benefits (e.g., long service leave)
Termination benefits
Share based payments
¢ Listed companies: more extensive disclosure
required under Act and under ASX Listing Rules
Required to have a “Remuneration Report” under s
300A
27
REMUNERATION REPORT
¢ Contents:
Board policy on determination of nature and amount of
remuneration (for company, or for consolidated group)
Relationship between remuneration policy and company
performance
Which element of remuneration is dependant on
satisfaction of performance condition, and details of that
condition
Full disclosure of remuneration similar to unlisted
companies (see LHW 12.310)
¢ Non-binding resolution of whether to approve Report
Two strikes and re-election: 25% vote against Report in
two consecutive years, directors must go for re-election
(“spill resolution”) 28
OTHER DISCLOSURE
REQUIREMENTS
¢ Other ASX rules on remuneration:
continuous disclosure of remuneration affecting share
price, e.g., CEO remuneration, issue of equity securities
¢ At request of shareholders:
5% or 100 shareholders
Related party transactions (Week 8)
¢ Margin loans
29
TERMINATION PAYMENTS AND
BENEFITS (1)
¢ Termination payment is defined as being given in
connection with retirement or removal from person’s office
¢ Includes given property
¢ Look at substance of payment
¢ Office is managerial or executive. Includes directors and
other key management personnel.
¢ Shareholder approval by ordinary resolution is required
Non binding resolution of remuneration report is not
enough
¢ If breach, amount is held on trust and required to be
refunded
Also subject to penalty
30
TERMINATION PAYMENTS AND
BENEFITS (2)
¢ Exemptions:
Damages for beach of contract, or under agreement
made before taking up office, or under industrial award.
But cannot exceed 1 year’s salary (averaged over 3 year)
Genuine pension/lump sum payments (subject to
statutory maximum)
¢ Also prohibited from receiving benefits in connection with
transfer of whole or part of undertaking or property of
company
31
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
32
DIRECTORS’ DUTIES
¢ The law imposes duties on directors to ensure
that they do not take advantage of their position.
These duties are imposed by:
Common law (duty of care)
Equity (fiduciary duties and others)
Statute
¢ Function
Protect shareholders from risk of harm to co or
its property
Make directors accountable for harm or
mismanagement
Maintain loyalty and trust 33
OVERVIEW
Directors’
duties
Types of
directors
Legal
definitio
n s9
Content
and
application
Breach
and
consequences
SOURCE OF DUTIES AND REMEDIES
¢ Duties:
Good faith, proper purpose (general law, statute)
No conflict rule, secret profits rule (general law)
Duty of skill, care and diligence (general law, statute)
Improper use of position, improper use of information
(statute)
Insolvent trading, other disclosure rules (statute)
¢ Remedies – breaches of general law duties
Damages (common law), equitable compensation
Account of profits, constructive trust
Rescission of contract
Injunction
¢ Remedies – breaches of statute
Civil penalties: fines, compensation, disqualification
Criminal penalties 35
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
36
DIVISION OF CORPORATE POWER
¢ The Act (s 198A) gives broad management powers to the
board of directors
¢ Board’s function and powers are extensive: see figure 12.1
and Table 12.1 in LHW, on functions and powers of the
board.
¢ At common law, members cannot override/interfere with
board decisions
Automatic Self-Cleansing v Cuninghame (LHW 12.85)
John Shaw v Shaw (LHW 12.90)
• Members rights are limited
• Alter constitution to restrict director’s powers, or,
s198A , or
• Remove directors
37
CORPORATE GOVERNANCE
• “Definition”:
• Rules and practices put in place within a company to
deal with relationship between directors, management,
shareholders and other stakeholders
• Not a legal term
• Mechanisms to ensure board is accountable and
controlled
• Main regulatory sources of rules:
• Legal obligations of Corporations Act and fiduciary
duties (e.g., directors’ duties)
• ASX Listing Rules, accounting and auditing standards
• Codes of corporate governance
38
ASX CORPORATE GOVERNANCE
LISTING RULES
• Solid foundations for management and oversight
• Establish roles and functions of board and management
(LHW 14.35)
• Structure board to add value
• Independent directors, independent Chair, define board
skills, board diversity
• Act ethically and responsibly: code of conduct
• Safeguard integrity of reporting
• Make timely and balanced disclosure: continuous
disclosure
• Respect rights of security holders
• Recognise and manage risks (LHW 14.70)
• Remunerate fairly and responsibly (LHW 14.80) 39
COMMITTEES OF THE BOARD
¢ A sub-group of the directors who have been delegated
certain functions of the board
¢ Ensures certain matters are given full attention by at least
part of the board
¢ ASX rules on corporate governance recognise a number of
committees:
Audit committee: Deals directly and independently with
internal and external auditors, reviews financial risk
and systems of internal control, considers company’s
accounting policies and significant transactions
Nomination committee: nominate new members to
board
Risk committee
Remuneration committee
40
WEEK 3 TOPIC
Management of companies
Company management
Directors’ meetings
Appointment, removal and disqualification
Remuneration
Introduction to directors’/officers’ duties
Corporate governance
41
