Corporate Governance Case Study: Analyzing Director's Duties & Removal

This case study delves into various aspects of corporate governance, focusing on the removal of directors and their responsibilities under the Corporations Act 2001 in Australia. It addresses the process for removing directors in both public and private companies, emphasizing the importance of resolutions as per Sections 203D and 203C. The document also highlights the procedure for executing company documents, requiring the affixing of the common seal with two directors as witnesses, and the ratification of pre-registration contracts to avoid personal liability for promoters. Furthermore, it discusses the delegation of directorial functions under Section 190 and the fiduciary duty of directors to act in the best interests of the company, also known as acting for a proper purpose. The analysis references several key legal resources and scholarly articles, providing a comprehensive overview of corporate governance principles and practices within the Australian legal framework. Desklib provides students access to more solved assignments and study resources.

Running head: MONITORING CORPORATE GOVERNANCE ACTIVITIES
MONITORING CORPORATE GOVERNANCE ACTIVITIES
Name of the Student
Name of the University
Author Note

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 to Gerner-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.

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.