Topic D – Relations between companies and outsiders
Is a company bound by a contract?
- The Corp. Act
- General Law of Agency
- General law principles about corp. authority - Company's internal governance rules How companies enter contracts
Directly - Authorisation
- Execution with common seal - Execution without common seal
- Other allowed method by company constitution Through an agent
- Actual authority
- Implied authority appointing a person - '' '' '' other conduct - Apparent authority
Recognition of apparent authority - A 'Holding Out'
- By Someone with actual authority - Reliance
Enforcing defective contracts made through an agent
If the person:
- Has no express actual authority at all
- Has express actual authority that is too narrow to be able to make this contract
Topic E1 – Corporate Governance
What is corporate governance?Operational definitions refer to corporate governance as the system by which companies are directed and controlled.
What is corporate governance concerned with?
- Implementing and devising practices - Balancing the interests
- Corporate governance costs
What mechanisms play a role in corporate governance?
- Director’s and Officer’s legal duties - Disclosing of info by companies - Takeovers
Rules and guidelines - Corporations Act 2001 - ASX Listing rules
- ASX Corporate Governance Council’s principles
Decisions made by companies - Enterprise Decisions - Capital Decisions - Constitutional Decisions Who makes the decisions?
Divided between
- The board of directors - Members in general meeting
4 principles about management structure of companies
1. Directors and Members each an organ of the company
2. Each organ has the power to make particular decisions
3. Powers of each determined by law and internal governance rules
4. That power is the power to act as the company or to delegate the power.
The directors’ power of management Under the replaceable rules:
- S198A(1) - S198A(2)
Law recognises shareholders’ reserve powers:
- Where the board of directors is unable to act
- To commence and prosecute legal proceedings, where the alleged wrongdoers control the company
- To ratify directors’ acts
Topic E2 – Company directors and other officers and Directors’ duties
Minimum of directors required Pty Ltd Company – at least 1 director Ltd Company – at least 3 directors Directors Role
A company’s directors are those people appointed in accordance with the company’s internal
governance rules to manage the business of the company.
Appointment and role of the managing director (CEO)
A company’s internal governance rules may provide for the appointment of a managing director as the company’s chief executive officer (CEO).
Committees of the board
The board of directors may also delegate some of its powers to a committee of directors
Types of directors
- Non/Executive Director - Independent Director - Nominee ‘’
- Alternate ‘’
-
Who owes the duties?
General law duties (By fiduciaries) - Directors
- Officers Statutory Duties
- S180 - S181 - S182 - S183 - S184
To whom are the duties owed and who enforces the duties?
General Law:
- Duties are owed to the company Statutory Duties
- ASIC
Topic E3: Directors’ Duties – Loyalty and Good Faith
General law – duty to act in good faith/bona fide in the best interests of the company.
The law that applies to the 'best interests of the company' first.
− Applies to past and present shareholders.
− Nominee directors (Appointed to represent a particular interest.)
− Corporate groups (If a conflict of interest, nominee directors will act in subsidiary's best interest)
− Employees (Directors should not
consider the interests of employees at expense of company's shareholders)
− The community (As law stands, company do not have a legal duty to consider the community)
− Creditors (Directors have the duty to exercise their powers in a way that does not prejudice ability to pay creditors)
Statutory law – duty to act in good
faith/bona fide in the best interests of the company
− Duty is found in S181(1)(a)
− Civil penalty provision
− Director acting recklessly could result in a criminal offence
General law – duty to use powers for a proper purpose
Directors may breach this duty even if they honestly believe their actions to be in the best interests of the company as a whole
Duty to avoid conflicts of interest – general law
General Law
− Now conflict rule
− No taking corporate property, information and opportunities
− Competing companies
− Nominee directors
All fiduciaries are under a duty to avoid conflict of interest situations
Duty to retain discretions
− Director’s must retain their freedom to make decisions on behalf of the company
− Can delegate work but not their whole role
Duty not to misuse info or position – statutory law
Related party transactions – statutory law Requirement to disclose certain interests – statutory law
Criminal Liability – statutory law
