Week 8 company law

Directors of a Company

Responsible for managing the affairs, day-to-day operations, and developing strategies and policies of the company. The Board of Directors is considered the "mind" of the company and holds the responsibility for managing its affairs.

Types of Directors

Include Executive Directors with management roles, Non-Executive Directors attending board meetings, De Facto Directors acting without valid appointment, Shadow Directors whose directions are followed, and Alternate Directors appointed to act in place of absent directors.

Board Meetings

Sessions where directors make decisions and oversee company operations, with a specified quorum required. The chairman leads the meeting, sets the agenda, and ensures proper board functions. Minutes are kept for transparency and accountability.

Appointment and Retirement of Directors

Involves appointing new directors through resolutions, retirement or resignation of directors, and removal through shareholder resolutions. The process includes initial appointment, potential retirement, and possible removal.

Authorities of Directors

Directors have actual and apparent authority, with actual authority given explicitly or implicitly by the company, and apparent authority existing when the company holds out a director as having authority. Directors must exercise their powers for the proper purpose and in the best interests of the company.

Duties of Directors

Directors have Seven Codified Duties, including acting within their powers, promoting company success, exercising independent judgment, reasonable skill, care, and diligence, avoiding conflicts of interest, not accepting benefits from third parties, and declaring interests in transactions.

Duty to Act within Powers (Proper Purpose) s.171

Directors must act within the company's constitution and exercise their powers for the purposes granted. Actions must align with the company's objectives, and using powers for improper purposes may require ratification by shareholders.

Duty to Promote the Success of Company s.172

Directors must act in a way they believe promotes the company's success for the benefit of shareholders. Factors to consider include long-term consequences, employee interests, business relationships, community impact, environmental concerns, business conduct standards, and fairness between shareholders.

Duty to exercise independent judgment

Directors must exercise their powers independently and not be influenced by external pressures.

Duty to exercise reasonable skill, care, and diligence

Directors are required to exercise the care, skill, and diligence expected from a reasonably diligent person.

Conflict of interest

Directors must avoid situations where their interests conflict with those of the company.

Secret profits

Any profit gained by a director through breaching their duties can be claimed by the company.

Failure to disclose interest

Entering into a contract without disclosing an interest can lead to a breach of duty.

Taking property from the company

Directors must not take company property for personal gain.

Continuing breach or intended breach

Companies can seek injunctions to prevent ongoing breaches by directors.

Joint and several liability

If multiple directors breach their duties, they can be held jointly or severally liable.

Loans to Directors

Shareholder approval is required for loans to directors or connected persons.

Substantial Transactions

Shareholder approval is needed for significant property transactions involving directors or connected persons.