An Australian proprietary company may appoint a person as a director by resolution passed in general meeting (section 201G of the Corporations Act), or the directors may appoint a person as a director (section 201H(1) of the Corporations Act).
If the directors of a proprietary company appoint a person as a director under section 201H(1) of the Corporations Act, the company must confirm the appointment of the director by resolution within two months after the appointment is made, or the person ceases to be a director of the company at the end of those two months (section 201H(2) of the Corporations Act).
A proprietary company may remove a director from office by resolution at a general meeting (section 203C of the Corporations Act), or a director may resign by giving a written notice of resignation to the Company at its registered office (section 203A of the Corporations Act).
The provisions in the Corporations Act in relation to the appointment and removal of directors of a proprietary company are ‘replaceable rules’ (section 141 of the Corporations Act). As such, they will apply unless they are displaced or modified by a company’s constitution.
The minimum number of directors that an Australian proprietary company must have is 1 director, who must ordinarily reside in Australia (Section 201A of the Corporations Act).
An Australian proprietary company is not required to have a secretary but, if it does have one or more secretaries, at least 1 of them must ordinarily reside in Australia (Section 204A of the Corporations Act).
If a company is required to lodge audited accounts with ASIC, it will be required to appoint an Auditor. Pursuant to section 325 of the Corporations Act, the directors of a proprietary company may appoint an auditor for the company if an auditor has not been appointed by the company in general meeting.
A person may be appointed as a director if they are an individual who is at least 18 years of age and not disqualified from managing corporations in accordance with the Corporations Act. A person is disqualified from managing corporations in a number of circumstances, including where the person is:
Directors govern a company on behalf of the shareholders of that company. The Corporations Act states at section 198A(1) that ‘the business of a company is to be managed by or under the direction of the directors’.
The directors may exercise all powers of the company except any powers that the Corporations Act or the company’s constitution (if any) require to be exercised by the company in general meeting (section 198A(2) of the
Corporations Act). For example, the directors may issue shares, borrow money and issue debentures.
Directors have a general law duty to avoid conflicts of interest with the company. Overlaying this general law duty is the statutory requirement, under section 191 of the Corporations Act, that directors disclose material personal interests in matters that relate to the company, and must notify each director by giving notice of such interests unless an exception applies (e.g. where the director has given standing notice of the nature and extent of the interest, and that notice has been accepted by the company).
This disclosure is required to be made on such matters put before the board before a director is able to vote.
Where there is conflict of interest, in the event that the company loses money as a result of that conflict, the director may be liable to account to the company for any profit derived or to indemnify the company against loss arising from the action.
A director found to be in breach of their duties, may face civil or criminal punishments. A criminal breach occurs if a director acts recklessly or with intentional dishonesty, as outlined in section 184 of the Corporations Act.