This article discusses the procedures for removal of directors, affixing of the seal, delegation of functions, and acting for a proper purpose under the Corporations Act, 2001 in Australia. It also explains the duties and liabilities of directors and the regulations for proprietary companies.
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Running head: MONITORING CORPORATE GOVERNANCE ACTIVITIES MONITORING CORPORATE GOVERNANCE ACTIVITIES Name of the Student Name of the University Author Note
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1MONITORING CORPORATE GOVERNANCE ACTIVITIES Question 1 Individuals who are appointed as directors and placed in the highest position in the organizational structure are so appointed by processes defined by the act and thus need to be removed through processes defined under the act. In case of public companies the Corporations Act, 2001 provides for the removal of directors through the passing of a resolution under Section 203D (Mortimore 2013). Private companies employ a similar process of removal of directors by passing of a resolution under the provisions of Section 203C. The Board of Directors of a company is charged with the administration and decision-making process for the same. In Australia companies are governed and regulated under the Corporations Act, 2001 (Hanrahan, Ramsay and Stapledon 2013). Question 2 The procedure for the same is affixing of the seal with two directors present as witnesses as envisaged in 127 (2) of the Corporations Act, 2001 (Gerner-Beuerle, Paech and Schuster 2013). Thus Shirley and Laverne must prove that the documents were executed by affixing the common seal with two directors as witnesses. The common seal of a company is the official signature of the company. The same is used for executing documents on behalf of the company. According toGerner-Beuerle and Schuster,to ensure that the contracts entered into on behalf of the company by the promoters are not personal obligations of their part the provisions of Section 131 of the Corporations Act, 2001 must be considered. This section states that pre- registration contracts need to be ratified by the company as soon as incorporation is completed to
2MONITORING CORPORATE GOVERNANCE ACTIVITIES ensure that the promoters are not personally liable for the same. Thus Shirley and Laverne need to ensure that the pre-registration contracts are ratified by the Corporations Act, 2001. Question 3 (a)Removal of directors under the Corporations Act, 2001 for proprietary companies happens through the provisions of Section 203C (Hargovan and Harris 2014). Thus for the removal of these directors a resolution would have to be passed as provided for in this Section. (b)The procedure for such removal would be through a show of hands by the directors and a majority vote would pass the resolution (Sjåfjell and Anker-Sørensen 2013). In cases of conflict of interest however a few directors may be restrained from voting. Question 4 Under Section 189 of the Corporations Act, 2001 it has been stated that directors of a particular company can rely on information from senior executives who are employed by the company. Delegation of the functions of a director refers to a transfer of functions, generally to a subordinate. This is provided for under Section 190 of the Corporations Act, 2001 and thus is allowed as per law (Harris, Hargovan and Adams 2013). Question 5 A director is the most powerful administrative authority in the affairs of the company. However, directors are employed by the company and hence must act in the best interests of the company and the shareholders (Keay 2014). This duty to protect the interests of the company
3MONITORING CORPORATE GOVERNANCE ACTIVITIES through their decisions is known as acting for a proper purpose. Thus, this observance of their fiduciary duty is called acting for a proper purpose.
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4MONITORING CORPORATE GOVERNANCE ACTIVITIES Reference List Gerner-Beuerle, C. and Schuster, E.P., 2014. The evolving structure of directors' duties in Europe.European Business Organization Law Review (EBOR),15(2), pp.191-233. Gerner-Beuerle, C., Paech, P. and Schuster, E.P., 2013. Study on directors’ duties and liability. Hanrahan, P.F., Ramsay, I. and Stapledon, G.P., 2013. Commercial applications of company law. Hargovan, A. and Harris, J., 2014. For Whom the Bell Tolls: Directors’ Duties to Creditors after Bell”(2013).Sydney Law Review,35, p.433. Harris, J., Hargovan, A. and Adams, M.A., 2013.Australian corporate law(Vol. 2). LexisNexis Butterworths. Keay, A., 2014. The public enforcement of directors' duties: a normative inquiry.Common Law World Review,43(2), pp.89-119. Mortimore, S., 2013.Company directors: duties, liabilities, and remedies. Oxford University Press. Sjåfjell, B. and Anker-Sørensen, L., 2013. Directors’ duties and corporate social responsibility (CSR).Boards of directors in European companies. Kluwer Law International, Alphen aan den Rijn Google Scholar.