Accidental Company Secretary® - Microsoft · Accidental Company Secretary® Participant notes ... See Appendix 1 for a sample notice agenda of a directors’ meeting and Appendix

© Governance Institute of Australia Ltd 2016

ABN 49 008 615 950

Accidental Company

Secretary®

Participant notes

This short course can be counted towards one of Governance

Institute of Australia’s Certificates (see over page for details).

Short courses and Certificates This short course constitutes one of Governance Institute of Australia’s Certificate courses on successfully passing the online exam.

For more information, or to enrol in the Certificate course, please contact Governance Institute in your state or visit www.governanceinstitute.com.au → Learning → Short courses & Certificates → Request Short courses and Certificates handbook.

Professional development at Governance Institute of Australia For further information regarding your study options, please refer to the ‘conclusion’ section within these notes

to explore your study options.

In-house training Governance Institute also offers flexible in-house training solutions that specifically meet your business needs. For more information, please contact Governance Institute in your state.

Disclaimer This course has been validated and self accredited before release and all reasonable care and attention paid to ensuring its accuracy during development.

Whilst this course has been accredited by Governance Institute of Australia Ltd and all reasonable care has been taken in the development of course material, Governance Institute of Australia Ltd, the authors of any course material and presenters:

• do not purport to provide legal, accounting, financial or tax advice or express any opinion, on any specific matter or issue, and their contributions or statements should not be relied upon for this purpose, whether made known to them or not;

• do not warrant that the content of its course is fit for any individual purpose or expectation other than as a study in the stated field, whether made known to them or not;

• do not warrant or represent any benefit other than as expressly published on the Governance Institute of Australia Ltd’s webpage (http://www.governanceinstitute.com.au/education-training/short-courses-certificates/features-and-benefits-of-study/)

• disclaim all responsibility and liability for any loss or injury arising from any decision or action taken based upon or prompted by the contents of course materials, howsoever caused; and

• reserve the right to correct any errors or omissions in their material, at any time and from time to time.

It is always important to seek independent legal or other professional advice in respect of one’s own particular circumstances.

Acknowledgments

Written and designed by: Professor Michael Adams FGIA Head of School of Law, University of Western Sydney

Revised by: Bill Hundy FGIA, Corporate Lawyer and Company Director, Chair Governance Course Review Panel

Allan Luu, Corporate Counsel

Contents 1 Introduction 1

1.1 What is the background to this course? 1

1.2 What is the aim of this course? 1

2 Appointment and duties of the company secretary 1

2.1 What are the core duties of a company secretary? 2

2.2 Discretionary duties of the company secretary 3

2.3 Can a company secretary be held personally liable? 4

2.4 Appointment and reporting lines of the company secretary 5

2.5 What are the key officers’ duties? 5

2.6 What company registers must be kept? 8

2.7 What corporate records are important? 10

2.8 What corporate accounts and disclosures are necessary? 10

3 Corporate governance 12

3.1 What does corporate governance mean? 12

3.2 What is the corporate constitution? 12

3.3 Can company members change board or management decisions? 13

3.4 Who regulates companies? 14

3.5 The role of ASX 14

3.6 Whistleblower protection 15

4 Directors’ meetings 17

4.1 Do companies have to have directors’ meetings? 17

4.2 How do I convene the board meeting? 17

4.3 What happens at a board meeting? 17

4.4 What needs to occur after the board meeting? 18

4.5 Board papers 18

5 Members’ meetings 19

5.1 Does the company need to hold members’ meetings? 19

5.2 How do I convene a general meeting? 19

5.3 What happens at a general meeting? 19

5.4 What needs to occur after the general meeting? 20

6 Conclusion 20

7 Resources 22

7.1 Legislation and regulators 22

7.2 Standards and guidelines 23

7.3 Governance Institute resources 23

7.4 Reference books 24

7.5 Reports and journal articles 25

7.6 Other resources 25

Appendices 27

Readings 29

Accidental Company Secretary®

Governance Institute of Australia 1

1 INTRODUCTION

1.1 What is the background to this course? The role of the company secretary is regulated by the Corporations Act 2001 (Corporations Act) and by the Australian Securities and Investments Commission (ASIC).

The Corporations Act is referred to throughout these materials and is accessible online at the Australasian Legal Information Institute (AustLII) at <www.austlii.edu.au> or through the Attorney-General’s Department at <www.comlaw.gov.au>.

While being a lawyer is not a prerequisite for appointment as a company secretary, it is essential that, as a minimum, you understand the legal obligations of the role, including a basic understanding of how to navigate the Corporations Act. It is also important that you keep up to date with developments in the area through continued education, whether by formal education or industry updates (such as joining the ASIC alert list or receiving email updates from a law firm). If ever in doubt, you should engage professional advisers.

This course provides a variety of checklists and insights to facilitate your transition into the company secretarial role. The historical development of the company secretarial role is discussed, current legal and regulatory requirements are examined and some examples of the typical tasks and activities of the company secretary are highlighted. A list of resources is provided to help you obtain more information as necessary.

1.2 What is the aim of this course? The aim of this course is to provide a comprehensive overview of the role and duties of a newly-appointed company secretary. While the focus of legal and regulatory requirements is for proprietary and public companies, the principles also apply to government enterprises and not-for-profit organisations.

The objectives are to:

• examine the role and core duties of a company secretary

• explore the range of legal responsibilities and duties of a company secretary

• provide helpful tips and useful resources.

2 APPOINTMENT AND DUTIES OF THE

COMPANY SECRETARY

Every registered public company in Australia is required to have at least one company secretary, one of which must ordinarily reside in Australia (s 204A). Only an individual who is at least 18 years old may be a company secretary (s 204B(1)) and a person who is disqualified from managing a corporation may only be appointed as company secretary if they are have been granted permission by ASIC or the court (s 204B(2)). A person must provide a signed consent to act as secretary of the company before being appointed (s 204C), and the company secretary is to be appointed by the directors (s 204D). Seemingly not a very difficult standard to attain, until you read the ASIC annual reports to discover the number of penalty notices that are sent to company secretaries for infringing these provisions in the Corporations Act.


2 Governance Institute of Australia

Originally, the company secretary was referred to as ‘a mere servant’ by Lord Esher over 150 years ago, (Barnett Hoares & Co v The South London Tramways Company (1840) 18 QBD 815) but since 1971 the courts have described the company secretary as ‘the chief administrative officer’ of the company (Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd)

[1971] 3 All ER 16).

In reality, every company secretary is different and the role is dictated by the size and type of organisation that has appointed them as an officer of the organisation. There are significant differences in responsibilities between a company secretary of a proprietary company that only has one shareholder and one director, to a public listed company on the Australian Securities Exchange (ASX).

However, it is possible to identify some core company secretarial duties and a variety of incidental or discretionary duties, depending upon the particular organisation.

2.1 What are the core duties of a company secretary? There are a number of core duties that all company secretaries are required to perform, to a greater or lesser extent. These are summarised below.

Compliance with the corporate constitution

The company secretary must ensure that the company complies with the provisions of the corporate constitution. This will include compliance with a pre-July 1998 memorandum and articles of association that is deemed to be a corporate constitution.

Statutory compliance

It is important that the company secretary is familiar with the Corporations Act and the legislation and regulations relevant to the company’s enterprises, and the general business environment. This includes the listing rules of any securities exchange upon which the company is listed , such as the Australian Securities Exchange (ASX) or the National Stock Exchange of Australia (NSX).

Preparation and lodgment of statutory returns

An important function of the company secretary is the preparation and timely lodgment of necessary returns for ASIC, and for any other authorities relevant to the company’s position, for example ASX and the Australian Charities and Not-for-profits Commission (ACNC).

Organisation of meetings

A major role of the company secretary is to organise and coordinate board meetings and attend these meetings to take minutes, advise the chair of procedural requirements and other duties.

The company secretary should also organise members’ meetings (also called general meetings), including the sending of notices, marshalling of proxies, taking of minutes and other duties.

See Appendix 1 for a sample notice agenda of a directors’ meeting and Appendix 2 for insights into the recording of minutes of directors’ meetings.



Maintenance of company registers

The company secretary should maintain, or arrange for professional maintenance of, the register of members, transfers, new allotments, share certificates and any other register required under the Corporations Act. The company secretary should be the contact point when working with an external organisation that is responsible if these functions are outsourced. The introduction of the Personal Property Securities Act 1999 in January 2012 removed the requirement to maintain a register of charges under s 271 of the Corporations Act (see section 2.5 below).

Other duties

Other duties of the company secretary may include the following:

• Custody and use of the company’s common seal, if the organisation still maintains a seal (after July 1998 they became discretionary under s 123).

• Maintenance of the company’s registered office and representation there during required opening times.

• Ensuring that the ACN, ABN or ARBN appears where necessary with the company name and that the name is displayed at the registered office and on all necessary ‘public documents’.

2.2 Discretionary duties of the company secretary While it is relatively easy to identify the ‘core’ duties, it is much harder to identify all the discretionary duties of a company secretary. This is because each organisation has a different structure and various other roles may be combined with the company secretarial role, such as legal counsel or financial controller.

Company secretaries often find themselves expected to look after a wide range of duties. It is useful to get a job description or some other written confirmation as to your duties, so you and others in your organisation are clear on what it is that you are actually expected to look after. Some of the more common additional functions that are added to a company secretary’s responsibilities include:

• signing documents and company notices

• being a bank account signatory

• acting as power of attorney

• ensuring the correct display of the business name

• overseeing executive and employee share plans

• subsidiary companies

• patents and trademarks

• safe custody of documents

• ensuring the accuracy of public statements

• trade practices

• environmental issues

• workplace health and safety

• personal property securities register (PPSA) administration

• superannuation

• stamp duties



• taxation

• insurance

• dividend reinvestment plans

• accounting

• legal advice

Regulatory bodies such as the Australian Taxation Office (ATO), ASIC, and ASX may require an individual to be nominated as the ‘authorised officer’ or ‘public officer’ for the company. The company secretary is often nominated by the company for these roles.

Readings 1 and 2 provide useful and thought-provoking insights into the role and duties of the modern day company secretary.

2.3 Can a company secretary be held personally liable? The answer to this question is yes, in relation to specific obligations of the company — the Corporations Act expressly states in s 188 that a company secretary will be held legally responsible for a contravention of certain provisions of the Corporations Act.

These are referred to as corporate responsibility provisions and include:

• lodging financial reports with ASIC (s 319(1))

• responding to an Extract or Return of Particulars (ss 346C and 348D)

• notifying ASIC of share issues (s 254X) and changes to officers (s 205B)

• complying with registered office requirements (ss 142 and 145)

• notifying ASIC of change of principal place of business (s 146)

• notifying ASIC of changes to the register of members, share structure or ultimate holding company of proprietary limited companies (ss 178A, 178C and 349A).

Other specific areas of statutory compliance under the Corporations Act are:

• corporate registers

• corporate records

• corporate accounts and disclosures.

A case with an important outcome for all corporate office holders and, more particularly the company secretary, is Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418. In that case, the company, Wave Capital, issued a prospectus for a rights issue of new shares to existing members and an offer of shares to convertible note holders. The board delegated full responsibility for the administration of the matter to the company secretary. Unfortunately for the company secretary, the relevant application for quotation on ASX was not made within the statutory time period. The Federal Court used its discretion under the Corporations Act and enabled the validity of the securities to be upheld, in spite of the technical breach, as it was an honest error as a result of the company secretary’s inadvertence. However, Justice French was critical of the company secretary’s oversight and considered that the company’s system of checks and balances was inadequate. To this end, his Honour made an ancillary order prohibiting the payment of the costs of bringing the action out of the company’s funds. Effectively, this unusual order was a de facto penalty imposed personally on the company secretary and the directors, as the likely result was that the order fell outside the parameters of the directors’ and officers’ (D&O) insurance policy.



2.4 Appointment and reporting lines of the company secretary It is good governance to recognise the independence of the company secretary in both the appointment process and the reporting mechanisms attached to the company secretarial role. Boards expect the company secretary to give impartial advice and to act in the best interests of the company. It is incumbent on boards of directors to ensure that company secretaries are in a position to do so. An important factor in protecting the integrity of the company secretarial role is to establish appropriate and transparent reporting lines for the company secretary, which are clearly and formally documented. For example, there should be:

• a direct reporting line to the chair for issues relating to the proper functioning of the board

• a direct reporting line to the CEO (or other relevant senior officer) for management issues.

See Governance Institute’s Good Governance Guide — The appointment and reporting lines of the company secretary for further insights.

2.5 What are the key officers’ duties?

Who is an officer?

First, it is important to know who is an ‘officer’ under the statutory definition and then to identify what their legal duties are. The definition section of the Corporations Act, called the dictionary, is in s 9, and defines ‘officer’ as:

a director or secretary of the corporation

or

a person who makes, or participates in making decisions that affect the whole or a substantial part of the business of the corporation or who has the capacity to affect significantly the corporation’s financial standing or in accordance with whose instructions or wishes the directors of the corporation are accustomed to act

Examples of who might fall within the second part of the definition above include:

• employees — includes senior managers who are employed under a contract of employment, with a common law duty of fidelity: Timber Engineering v Anderson [1980] 2 NSWLR 488.

• senior managers — bound by a number of duties because of their position as employee, director or agent and usually includes the chief executive officer or managing director. Many larger companies have other executives, such as the chief financial officer or general counsel.

Other sections of the Corporations Act specifically classify the following people as officers:

• a receiver and/or manager

• an administrator of the corporation

• an administrator of a deed of company arrangement executed by the corporation

• a liquidator of the corporation

• a trustee administering a compromise or arrangement.

Officers’ duties

The key duties of an officer can be expressed as:

• common law (honesty, reasonable care and diligence)

• equitable fiduciary duties (avoid conflicts of interest)

• statutory duties (under Corporations Act, especially ss 180–185).



There is a natural overlap of these duties, as can be shown in this Venn diagram developed by Professor Adams in 1992 (and revised in 2004).

Figure 1: Overview of Officers Duties

Source: Adams M, 1992 (revised in 2004).

The officers’ statutory duties are divided into those that attract a civil penalty or those that are a criminal offence. The civil duties cover:

• to act with care and diligence (s 180(1))

• to act in good faith, for proper purpose and in the best interests of the company (s 181)

• not to misuse position (s 182)

• not to misuse information (s 183)

• not to gain an advantage for themselves or someone else or to cause detriment to the corporation.

Directors (not the broader category of ‘officers’) must also comply with the prohibition against insolvent trading (s 588G).

The Corporations Act contains a separate criminal provision, where the officers’ duties (under ss 181, 182 and 183) are breached either dishonestly or recklessly by s 184. This can result in a fine of up to $340,000 and/or five years’ imprisonment. There is a separate criminal offence of insider trading, which must relate to securities trading (s 1043A), and which has a maximum $765,000 fine and/or five years’ imprisonment.

The Corporations Act provides that common law and equity are to be applied in conjunction with the statutory provisions in s 185. It is possible for an officer to be held liable for a breach of the Corporations Act, as well as for a breach of the common law and/or equitable duty. For example, in State of South Australia v Marcus Clark (1996) 66 SASR 199, where the chief executive officer (CEO) was held liable for breaching his duties and was sued for approximately $81million.



One of the most important duties of directors and officers is the requirement to act with care and diligence in accordance with s 180(1). This requires all directors and officers to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would in the corporation’s circumstances, if they were in that position. This section is civil and not criminal, and it comes under the civil penalty provisions of Part 9.4B of the Corporations Act.

Australia has also enacted a business judgment rule that is a defence to both s 180(1) and the equivalent common law or equitable duties, if the four elements in s 180(2) can be proven. The accurate keeping of minutes from directors’ meetings may provide evidence to the court that the directors took reasonable care in formulating their decisions.

Cases that are topical examples involving breaches of the statutory duties include

ASIC v Hellicar; ASIC v Brown; ASIC v Gillfillan; ASIC v Koffel; ASIC v Terry; ASIC v O'Brien; ASIC v Willcox; ASIC v Shafron [2012] HCA 17 (3 May 2012). Collectively known as the James Hardie decisions, they provide the following important lessons for directors, general counsels and company secretaries of public companies.

Directors

• Before confirming acceptance of board meetings and other documents tabled at board meetings, each director should carefully and personally review those materials. Inaccuracies or concerns should be raised as early as possible. Such reviews are not mere administrative acts, as minutes are strictly taken as the final record of the meeting’s discussions.

• Directors cannot rely solely on the advice of management under the allowance given by s 189 of the Corporations Act. They cannot use advice of others as a substitute for their own examination of a matter where that matter is within the board’s responsibilities.

• Non-executive directors are also officers of the company and as such will be liable if they do not meet their standard of care and diligence, notwithstanding that they are not involved in the day-to-day running of the business. Reading 4 provides further insights into the role of the non-executive director.

• For company statements (including ASX market announcements), liability can be attached to each officer for breaching their duty of care and diligence under s 180(1) of the Corporations Act, where the company makes a misleading or deceptive statement. That liability arises irrespective of their individual involvement in the process of issuing the statement.

General counsels and company secretaries

The dual role of company secretary/general counsel involves a high degree of responsibility that extends their statutory responsibilities to include:

• protecting the company from legal risk

• critically analysing external advice given to the board and raising any concerns that the review identifies.

The two roles are inseparable and it is not possible for them to be one role but not the other at any point in time.



Senior executives

Senior executives also fall within the ‘officer’ definition if they participate in decision-making that affects the whole, or a substantial part, of the company’s business. Participation encompasses not only actually making decisions, but also contributing towards that process. In doing so, such persons are officers that in turn owe duties of care and diligence to the company.

• ASIC v Adler [2002] NSWSC 171; (2002) 20 ACLC 576:

When directors are considering, or otherwise dealing with, a transaction where they could be receiving a benefit, they should ensure that the following actions are taken:

– disclose their interest in full

– follow the organisation’s reporting process

– act only at ‘arm's length’

– ensure that conflicts and potential conflicts are avoided.

In this case, the three former directors of HIH, along with the corporation controlled by the defendant, were ‘knowingly concerned in’ a contravention of the related party rules, notwithstanding that they did not consider it a contravention as they had incorrectly considered that the transaction was within the ‘arm's length’ exception.

• ASIC v Vizard [2005] FCA 1037; (2005) 219 ALR 714:

Directors are under a duty to refrain from using confidential information obtained during the course of their directorship for an improper purpose.

In this case, Mr Vizard breached his duties as a Telstra director when he used confidential Telstra information to trade in the shares of three public listed companies.

• Vines v ASIC [2007] NSWCA 75; (2007) 62 ACSR 1:

In this case, Mr Vines was found to have misled, or provided inadequate disclosure of material information to the board of director, breaching his duty to exercise due care and diligence. His personal knowledge in the circumstances was such that the board was relying on him to make timely, accurate and complete disclosures.

2.6 What company registers must be kept? The Corporations Act is divided into 28 different chapters and ch 2C is entitled ‘Registers’ (ss 167A–178D). This contains details of all the corporate registers that must be kept by a company, if relevant to that particular type of organisation.

The registers that are required to be kept by virtue of s 168 (1) are listed below.

Register of members

The relevant provision in the Corporations Act is s 169. This is the most important register for a company and if you have more than 1,000 members it may be worth outsourcing the maintenance of the register to a professional entity. There is a variety of software available to make the compliance issues as easy as possible.

Register of option holders

The relevant provision in the Corporations Act is s 170. This only needs to be kept if the company issues options to buy its shares at a later date.



Register of debenture holders

The relevant provision in the Corporations Act is s 171. This is necessary only if the company issues debentures.

Guidance as to the form and content of these registers is given within the above sections (ss 169, 170, 171) of the Corporations Act.

Register of beneficial ownership

Listed companies must keep a register of beneficial ownership under s 672DA of the Corporations Act.

The registers should be located at any one of the following:

• the company’s registered office

• the office at the principal place of business

• the office where the work involved in maintaining the register is done

• another place in the jurisdiction approved by ASIC (s 172 (a-d)).

It is a requirement to notify ASIC if the registers are not at the registered office or principal place of business. The use of computerised registers is acceptable to ASIC, but notice must be given to ASIC as to the ‘place of storage’ and ‘place of inspection’ under s 1301 (if those places are different).

Section 177 states that information on company registers cannot be used to contact or send material to a person unless that use or disclosure is:

• relevant to the holding of shares, options or debentures in the company or

• approved by the company.

It is prohibited to use information from company registers for purposes proscribed by the regulations. The proscribed purposes include the soliciting of donations or the making of certain unsolicited offers to acquire shares.

There are requirements for the storage of other company documents that you should be aware of if you work for a public company.

These documents include:

• lodgment of special resolutions

• proxy forms — statement in notice of meeting

• individual resolutions for voting on directors

• voting of interested directors

• financial benefits to directors

• directors’ report — specific information, such as directors’ qualifications.

Personal Property Securities Act 2009

The Personal Property Securities Act 2009 (PPSA) commenced on 30 January 2012. It brought significant changes to the area of security interests taken in personal property (generally non-land assets) and replaced various state, territory and Commonwealth electronic and paper registers. The PPSA removed the requirement to maintain a register of charges under s 271 of the Corporations Act, but adds to the company secretary’s work of ensuring personal property security interests are registered when applicable.



2.7 What corporate records are important? Section 286 of the Corporations Act imposes an obligation on all companies to keep financial records that explain the transactions and the financial position of the organisation. Where the financial records are produced in a language other than English, an English version must be available upon request within a reasonable time (s 287). These records must be kept for at least seven years and, if in an electronic format, must be convertible into hard copy within a reasonable time (s 288).

This can be distinguished from financial reporting of audited accounts, which is required for large proprietary companies and all public companies (s 292).

2.8 What corporate accounts and disclosures are necessary? The answer to this question depends on how the organisation is classified. Proprietary companies generally are companies that are registered as, or convert to a proprietary company under the Corporations Act. They should have no more than 50 non-employee shareholders and generally not make offers that may invoke the investment disclosure requirements under Chapter 6D of the Corporations Act.

A small proprietary company has the lowest level of disclosure within the corporate world, whereas a a public company listed on ASX (known as a ‘disclosing entity’) has the highest level.

Small proprietary company

A company is a small proprietary company if it meets at least two of the following requirements (s 45A(2)):

• it has less than $25 million in consolidated revenue

• it has fewer than 50 employees

• it has less than $12.5 million in consolidated gross assets.

Small proprietary companies generally have a small number of stakeholders and therefore mandatory disclosure requirements are minimal. Small proprietary companies generally do not have to produce financial reports under s 292 unless:

• members holding five per cent of votes request them (s 293) or

• ASIC gives a direction (s 294).

Large proprietary company and public company

A large proprietary company is a proprietary company which fails to satisfy the criteria for a small proprietary company (s 45A(3)).

For large proprietary and public companies, the key provisions are contained in Part 2M.3 ‘Financial Reporting’ and include:

• Preparation of the ‘annual financial reports’, which includes:

– the financial statements — profit and loss account, statement of cash flows, balance sheet and notes (s 295)

– the consolidated financial statements where the company is a controlled entity (s 295)

– the directors’ report (ss 298–300)

– the auditor’s report on the financial statements (s 301).



• Preparation of any additional reports required in the company’s situation:

– ASX preliminary final report (LR 4.10)

– dealer’s licence annual statement.

• Convening and holding of directors’ meeting to approve annual general meeting reports and any additional reports.

• Dispatch of annual general meeting reports to shareholders (ss 314–316).

• Convening and holding the annual general meeting to receive and adopt the annual general meeting reports (s 317).

A large proprietary company or public company is required to produce an audited financial report for the financial year. However, a small proprietary company that has produced an annual financial report is not required to have the report audited if the report is prepared in response to s 293, and the director(s) did not ask for the financial report to be audited.

Disclosing entities

A disclosing entity is defined in s 111AC. It is a company that has 100 or more members and has raised capital using a disclosure document (such as a prospectus). Disclosing entities have the highest level of disclosure requirements. In addition to the requirements for large proprietary companies and public companies, they must comply with the continuous disclosure regime and may be subject to additional reporting obligations. Most listed companies are disclosing entities. The Corporations Act requires listed companies to make additional disclosures, for example the remuneration report per s 300A.

In addition, most disclosing entities are ASX-listed entities. This means that the entity must also comply with the ASX Listing Rules.

ASIC disclosure for all entities

ASIC sends an ‘Extract of Particulars’ to each company each year, usually shortly after the anniversary of the date the company was registered (s 346A).

It is not necessary to respond to ASIC unless the details contained in the Extract are incorrect or ASIC requires further details (s 346C). However, a response is required if ASIC issues (requests) a ‘Return of Particulars’ (s 348D). A ‘Return of Particulars’ will be issued where ASIC believes that the particulars recorded in a register maintained by the ASIC are not accurate.

If a company has not lodged a financial report with ASIC under ch 2M within 12 months, the directors must pass a solvency resolution (s 347A) within two months of the company’s annual review date. If a company fails to do this, or passes a negative solvency resolution, ASIC must be notified within seven days (s 347B). It is recommended that you undertake the Governance Institute course Meeting ASIC Requirements for comprehensive information on ASIC.

Reducing ‘red tape’

On 19 March 2015 the Corporations Legislation Amendment (Deregulatory and Other Measures Act 2015 (Cth) was passed and given Royal Assent.

This Act made a number of amendments to the Corporations Act to remove unnecessary regulation, clarify existing regulatory obligations and enhance the efficient operation of certain government bodies.



The key measures in the legislation include:

• the removal of the obligation on directors to call a general meeting at the request of only 100 shareholders (thereby only allowing members that collectively have at least 5% of the voting shares to make that request)

• reducing restrictions on the circumstances in which companies can pay dividends

• removing the obligation on unlisted disclosing companies to prepare remuneration reports

• exempting companies limited by guarantee from the need to appoint or maintain an auditor when they either do not need to prepare a financial report or have their financial report audited.

3 CORPORATE GOVERNANCE

3.1 What does corporate governance mean? ‘Corporate governance’ became the buzzword of the 1990s following the UK Cadbury Committee report which was commissioned as a reaction to the poor corporate controls and company failures of the 1980s. The US$6.3 billion collapse of Enron in December 2001 followed closely by Worldcom, Parmalat, HIH Insurance and One.Tel and more recently the problems associated with Centro, Allco Finance Group and ABC Learning focused public attention closely on the quality of corporate governance practices instituted by those corporations and has ensured that corporate governance has never really left the headlines. The ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd edition with 2014 Amendments) defines corporate governance as:

The framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations.

Good corporate governance is the first step to creating a robust corporate structure. The company secretary is in a unique position to help oversee this process. They are part of the organisation’s management, but also manage the board meeting process, and as such are in a position to objectively view and assess the board and management’s performance, as well as the interaction with company members and employees.

3.2 What is the corporate constitution? The corporate constitution is the document that defines the company and the relationships within it. Section 140 of the Corporations Act states that the corporate constitution creates a contract between:

• the company and each member

• the company and each director and company secretary

• each member of the company

under which each person agrees to observe and perform the constitution as it applies to them.1

1 Prior to 1 July 1998, all companies in Australia had a memorandum and articles of association. After that date, all companies

were deemed to have a corporate constitution. After 1 July 1998, a company’s memorandum and articles were

automatically converted in name to being a corporate constitution.



Section 134 of the Corporations Act provides that a company’s internal management shall be governed by the replaceable rules of the Corporations Act, by a corporate constitution or by a combination of both.

This provides all companies with a choice to adopt their own corporate constitution or rely on the basic rules laid down in the Corporations Act, called replaceable rules.

These are all listed in s 141 and cover:

• directors’ meetings

• company secretary

• inspection of books

• shares and transfers of shares

Where a corporate constitution contradicts a replaceable rule, the constitution will take priority. However, where a constitution is silent, the company may rely upon the relevant replaceable rule in the Corporations Act. Further, a corporate constitution can be used to specifically exclude individual replaceable rules without the need to incorporate an alternative in the constitution.

If the company wishes to amend or adopt a new corporate constitution, the members must pass a special resolution by s 136.

3.3 Can company members change board or management decisions?

Figure 2: Organ theory of corporations (Adams M, 1995)

Every company has a slightly different structure, but most of the fundamentals can be illustrated with this simplistic diagram represented as Figure 2. Certain specified organs of the company or its agents can only make legal decisions. In law, the company is seen as a separate legal entity (s 124) and is the real ‘person’ employing managers, employees and transacting with third party suppliers or customers. This concept is known as the ‘corporate veil’.



The law states clearly that the Corporations Act or the corporate constitution provides the board of directors — and not the company members or the managers — with the power to make certain decisions. Even if the company members disagree with the board, they may not change those decisions where authority to decide is granted to the directors by the Corporations Act or corporate constitution: NRMA v Parker (1986) 6 NSWLR 517; 4 ACLC 609. The members do have the power, however, to amend or adopt a new corporate constitution with a special resolution (s 136) or remove a director with an ordinary resolution depending upon the type of company: s 203C (proprietary company) or s 203D (public company).

Decisions need to be made at meetings, which must be validly held and recorded in minutes at a board level or at the members’ meetings. Managers rely upon agency authority, usually through the formal grant of a delegation of authority or a power of attorney. Actions of management can also be ratified by the board. The directors obtain their powers from s 198A, which is a replaceable rule that can be altered or discarded by the company’s constitution.

In addition to signing documents under power of attorney or delegation of authority, directors can also authorise documents to be signed (executed) under the Company Seal without it by way of s 127(1).

3.4 Who regulates companies? ASIC enforces and regulates company and financial services laws. The Australian Prudential Regulation Authority (APRA) regulates authorised deposit-taking institutions (ADIs).

To execute their aim of protecting consumers, investors and creditors, ASIC is allocated funds from the Federal Budget. During the period 2009–10 following the global financial crisis, ASIC used s 50 of the Australian Securities and Investments Act 2001 (the ASIC Act) to seek compensation for investors who had lost funds due to failed investment schemes.

It is recommended that you access the ASIC website at <www.asic.gov.au> for comprehensive information in relation to ASIC’s role in company and financial services regulation.

3.5 The role of ASX ASX requires companies listed on the ASX to provide regular reports to the market, including annual reports. The ASX Listing Rules prescribe what information must be included in periodic reports. Note that these requirements are in addition to the Corporations Act requirements.

The ASX Listing Rules contain requirements such as admission requirements, continuous disclosure, additional reporting for mining companies and rules around transactions with related parties.

ASX Listing Rule 4.10.3 requires listed companies to disclose their compliance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd edition, with 2014 amendments). ASX’s approach is to require companies to report against the principles and recommendations on an ‘if not, why not’ basis, rather than mandating compliance with all of the guidelines, acknowledging the varying corporate governance needs of different companies at different stages in their life cycles. Companies are instead required to show that they have put in place procedures which seek to meet the ‘spirit’ of the principles. That is, the principles are designed to encourage the embedding of a culture of good corporate governance that goes above and beyond mere ‘tick the box’ compliance.



There are eight core principles:

1. Lay solid foundations for management and oversight

2. Structure the board to add value

3. Promote ethical and responsible decision making

4. Safeguard integrity in financial reporting

5. Make timely and balanced disclosure

6. Respect the rights of shareholders

7. Recognise and manage risk

8. Remunerate fairly and responsibly

Each of these principles is accompanied by a number of more specific recommendations. For example, Principle 8: Remunerate fairly and reasonably, includes a recommendation that the board establish a remuneration committee (Recommendation 8.1).

There are two recommendations that are compulsory for certain companies:

1. All companies within the All Ordinaries Index must have an audit committee and, for all companies within the ASX300, the audit committee must have at least three members who are non-executive directors, the majority of whom are independent (Listing Rule12.7).

2. All companies within the ASX300 must have a remuneration committee (Listing Rule 12.7).

It is recommended that you access the ASX Corporate Governance Principles and Recommendations on the ASX website at <www.asx.com.au>.

3.6 Whistleblower protection A company secretary is the conduit between the board and executive management. If there is a lack of commitment to corporate governance within a company, a company secretary may face ethical dilemmas as a result of conflicting responsibilities.

In order to encourage the reporting of suspected breaches of the Corporations Act, Part 9.4AAA was introduced in 2004. The framework provides protection for the discloser, when they either refer information to an appropriate person within the company or to ASIC.

Section 1317AA protection is available for a discloser who is:

• an officer of the company

• an employee of the company

• a person who has a contract for the supply of services or goods to a company or

• an employee of a person who has a contract for the supply of services or goods to a company.

Protection is available for the disclosure of information to:

• ASIC

• the company’s auditor or member of an audit team conducting an audit of the company

• a director, secretary or senior manager of the company or

• a person authorised by the company to receive disclosures of that kind.



The discloser is also required to fulfil certain requirements in order to qualify for the statutory protection. The discloser must:

• give their name prior to disclosing the information

• make the disclosure in good faith

• have reasonable grounds for suspecting that the information indicates that the company, or an officer or an employee, has breached a provision of the Corporations Act.

The consequences involved when there has been a disclosure for which protection is available are outlined below:

Legal protection (s 1317AB)

There is no protection for a whistleblower if there are civil or criminal consequences as a result of their own involvement in the conduct which they are disclosing which comes to light as a result of their disclosure.

However, protection from civil and criminal liability is afforded to a whistleblower as a result of making disclosure, and includes protection from consequences that would have been otherwise suffered, for example, as a result of breaching a contract. They also have qualified privilege in respect of the disclosure. If the disclosure itself constitutes the breach of a contract to which the whistleblower is a party, the contract may not be terminated. If an employee has had their employment terminated as a result of the disclosure, the court has the power to order that they be reinstated.

Protection from victimisation (s 1317AC)

Victimisation of whistleblowers is prohibited under this section. When a person qualifies for disclosure protection as a whistleblower, victimisation occurs when another person:

• engages in conduct that is intended to cause detriment to the whistleblower;

• threatens to cause detriment or create fear that they will cause detriment to the whistleblower, or

• is reckless regarding whether it will do so, by threatening that some detriment will be suffered by the other person.

Where a company contravenes this provision, an officer or an employee involved in the contravention may also be liable for the commission of the offence.

The right to compensation (s 1317AD)

A whistleblower may recover compensation from a person if they suffer loss as a result of the person’s victimisation (ie their contravention of s 1317 AC).

Confidentiality (s 1317 AE)

Where protected disclosure is made to a person, or another person obtains the information indirectly, the information and the discloser’s identity must be treated as confidential. However, there are a number of exceptions which enable information to be passed on to the following:

• ASIC

• APRA

• a member of the Australian Federal Police (AFP)

• another person, with the consent of the discloser.



4 DIRECTORS’ MEETINGS

4.1 Do companies have to have directors’ meetings? Generally, all companies must have board meetings to make decisions that bind the company. As a matter of practice, the larger the corporate entity, the more formal the board meeting will be. Small proprietary companies may not need to meet regularly as decision-making authority may have been delegated to a single director or the company may not be active. In this case, the company will still be required to meet at least annually to pass a solvency declaration. Larger companies or listed public companies may need to meet regularly (eg monthly or quarterly) to make decisions that are required throughout the year. The company’s constitution or s 248A, if it applies, may allow the directors to pass a written resolution without having a meeting, by circulating it to all of the directors and having them each sign a copy.

The following sections will direct you to the basic points under the Corporations Act, but it is worth remembering that all meetings have their own culture depending upon the organisation’s history. The Governance Institute course Meetings, Minutes and Resolutions deals with this topic in more depth.

4.2 How do I convene the board meeting? It is the ordinary function of the company secretary to convene board meetings on the instructions of the chair of the board or at the request of a director. Every valid meeting requires a notice to be sent and it is normal to include an agenda. Only a reasonable notice period is required and that depends on the circumstances of the organisation (s 248C). All meetings must be attended by a sufficient number of directors (a quorum). According to s 248F, a meeting must be attended by at least two directors in order for a quorum to be reached, however the corporate constitution can replace this rule. A quorum can be reached where the directors either meet in person, or via telephone or other similar technology (s 248D).

See Appendix 1 for a sample notice of agenda for a directors’ meeting.

4.3 What happens at a board meeting? This will depend upon the size and type of organisation that is holding the board meeting. Therefore, the practices of a family proprietary company around the dinner table are different to a public listed company such as Telstra Corporation Ltd.

Broadly, the starting point for considering the business of a directors’ meeting of any type of company is the obligation of directors to manage or direct the company (s 198A). They will do this through resolutions at board meetings to approve particular matters or by delegation to others. The directors must exercise their obligations within the board meeting with care and diligence, which (at a minimum) requires the board to monitor the implementation of its decisions and the performance of management and the company generally. Board meetings are therefore the venue through which the board makes decisions to manage or direct the company and monitor its performance.

Certain matters must be considered at board meetings and cannot be delegated to others to decide. This includes the approval of financial statements, appointment of directors and delegations of authority.

The agenda for a board meeting should contain the order of business and set out the decisions that are required of the directors. The board papers should therefore contain information that enables the directors to make decisions that promote the interests of the company and to act in accordance with their duties.



Information provided to directors should be at least sufficient to enable directors to achieve the following:

• Decide all matters with due care and diligence and satisfy themselves that the decisions are in the best interests of the company and that they are sufficiently informed to the extent they reasonably believe to be appropriate (s. 180).

• Ensure that all decisions are made in good faith and for proper purpose (s181).

• Ensure that such decisions would not cause the company to become insolvent (s 588G).

Procedurally, decisions of the board must be approved by a majority of directors entitled to vote (s 248G), although the constitution could provide for a different decision-making threshold. Generally, boards are not formal in their voting process and often decide matters on the basis of unanimous consensus, even though the constitution may provide that a majority only is required.

4.4 What needs to occur after the board meeting? It is important that the minutes of the board meeting are drafted quickly and sent to the chair of the meeting. Any resolutions and actions should be communicated as quickly as possible to those persons that are required to carry out any particular decisions and any regulators (such as ASX or ASIC) that may need to be informed of decisions.

Minutes must be entered into the minute book within one month of the meeting (s 251A(1)) and they must be signed by the chair of the meeting (or of the next meeting) within a reasonable time.

The legislation contains a number of sections that deal with the laws of directors’ meetings and in particular are found in ch 2G Pt 1 (ss 248A–248G).

See Appendix 2 for insights in recording minutes of directors’ meetings and Appendix 3 for sample minutes of a directors’ meeting. See Appendix 4 for a sample ‘Action items list’.

4.5 Board papers Board papers represent the information that the board receives to enable it to fulfil its duties. When developing and presenting board papers, there needs to be a balance between the level of detail required and providing too much information.

It is good governance to establish written guidelines on how board papers should be presented. These guidelines should be clearly communicated to all relevant parties. For example, board papers should:

• be written in ‘plain English’

• avoid use of acronyms and/or industry ‘jargon’ (If that is not possible, a glossary of terms should be provided.)

• consistent and readable.

See Governance Institute’s Good Governance Guide Board Papers for further insights and guidelines on the presentation and distribution of board papers.



5 MEMBERS’ MEETINGS

5.1 Does the company need to hold members’ meetings? Members’ meetings are usually called general meetings and they occur either as an annual general meeting (only compulsory for public companies by virtue of s 250N) or as a special or ‘extraordinary’ general meeting.

Members’ meetings may be required to be held if a matter requires a member resolution – for example, a change to the company constitution or change of company name. A company with only one member or a proprietary company may pass a member(s)’ resolution without a meeting by the member(s) signing a written resolution (ss249A, 249B).

It is technically possible for a proprietary company to never have a general meeting, but this is most unlikely. The Governance Institute course Meetings, Minutes and Resolutions deals with this topic in more depth.

5.2 How do I convene a general meeting? The board will usually instruct the company secretary to convene a general meeting at a specified date, time and location. Both the ordinary and special business of the meeting will be set out in the notice. Certain matters, such as amending a corporate constitution, must be passed by a special resolution (75 per cent of the votes cast at the meeting). An explanatory statement is usually included setting out the reasons why the company is seeking to have a resolution passed. The notice must be sent out 21 days prior to the meeting (s 249H) (28 days for a listed company (s 249 HA)) and it is important to note that this does not include the day of posting/faxing/emailing or the day of the actual meeting, so it must be 21 or 28 ‘clear’ days prior to the meeting.

5.3 What happens at a general meeting? The company secretary’s role is to assist the chair in conducting the meeting. The purpose of the meeting is to enable the various motions to be passed into resolutions (that is, decisions of the company).

Voting may take place by a show of hands (one vote per member in attendance) or by a poll (an actual count of the votes of each member or proxy holder based on one vote for each share held). Proxies are lodged with the returning officer in advance of the meeting (directed for or against the motion) or provided to a specified proxy holder who attends the meeting. The proxies do not take effect unless the proxy holder is present. The proxy holder may vote on a show of hands although this right can be displaced by the corporate constitution. Proxy holders otherwise have the same rights to speak and vote or join in the demand for a poll at the general meeting (s 249Y). It is usual for most members to appoint the chair of the meeting as their proxy holder.

The NSW Court of Appeal decision finding the NRMA’s Nick Whitlam innocent of charges relating to abuse of proxies appointed to him left the law a little confusing in relation to company officers acting as proxies. In short, the court held that officers who act as proxies for members solely owe their duty to the appointing member, and do not owe a duty to the company as a whole while acting as a proxy (see Whitlam v ASIC [2003] NSWCA 183). Section 250A(4) positively requires a chair to vote if instructed in a proxy instrument and in accordance with the voting instructions. Other persons acting as proxies are not compelled to vote, but if they do, they must vote in accordance with the instructions in the proxy instrument.



Where a company (body corporate) owns shares in another company, a person may be appointed as a corporate representative, to enable the company to exercise its legal rights as a member when voting at members’ meetings. Members may appoint body corporate proxies as well as individuals (s 249X(1A)). This promotes the electronic collection of proxies. Also, an individual may be nominated by a body corporate which has been appointed a proxy to exercise the usual functions necessary on attendance at meetings, such as voting.

5.4 What needs to occur after the general meeting? The minutes should be drafted as soon as possible after the general meeting and must be entered into the minute book within one month of the meeting. The signing of the minutes does not have to occur within that same timeframe, as the Corporations Act states ‘within a reasonable time’ by the chair (s 251A).

Companies listed with the ASX need to comply with other requirements under the ASX Listing Rules. In particular, the results of each vote at a general meeting must be notified to ASX immediately after the meeting has been held (Listing Rule 3.13.2). The address of the chair (or any prepared announcement) must be lodged with ASX prior to the start of the meeting (Listing Rule 3.13.3)

Members’ meetings are covered by Ch 2G of the Corporations Act, especially in Pt 2G.2.

Reading 4 provides a general guide on corporate minute-taking. See Appendix 5 for sample minutes of a members’ annual general meeting.

6 CONCLUSION

Corporate governance is a complex and evolving area of regulation, law and business. This course examines the important role of the company secretary within this context. The company secretary has legal obligations. Ignorance, whether intentional or actual, is not a defence and therefore it is imperative that you, as company secretary, have sufficient knowledge and appropriate external advice to meet your obligations in this important role. As a practical matter, you may wish to check your organisation’s directors’ and officers’ (D&O) insurance policy.

Now is a perfect time to reflect on your role within the organisation and decide whether you are fully equipped to carry out this important function. Governance Institute of Australia offers a number of professional development courses.

Suggested pathways, to attain and consolidate your career qualifications and experience are outlined below:

Courses Benefits

Short courses

Individual courses

The short courses cover a wide range of topics in governance, risk management and Not-for-profits

In half a day gain the essential skills to apply in the workplace to drive responsible performance

Improve skills and knowledge in corporate governance and risk management

Meet compulsory CPD requirements (for all Governance Institute Certificate members)

For information or to obtain a handbook visit Governance Institute of Australia’s Short courses at www.governanceinstitute.com.au → Learning → Short courses & Certificates → Request Short courses and Certificates handbook



Courses Benefits

Certificates

Certificate in Governance Practice – six course requirement which comprises of:

Two compulsory course and four elective courses

Certificate in Governance and Risk Management – six course requirement which comprises of:

Four compulsory courses and two elective course

Certificate in Governance for Not-for-Profits

– six course requirement which comprises of:

Five compulsory courses and one elective course

Certificated membership

Post nominal GIA(Cert) on successful completion and application for membership

Recognition of study – a maximum of two course exemptions for a second certificate

Meet compulsory CPD requirements (for all Governance Institute Certificate members)

For information or to obtain a handbook visit Governance Institute of Australia’s Certificates in Governance and Risk Management at www.governanceinstitute.com.au → Learning → Short courses & Certificates → Request Short courses and Certificates handbook

Post Graduate Certificate or Graduate Diploma (Risk)

Graduate Certificate of Applied Risk Management

Pass four subjects

(or)

Graduate Diploma of Applied Risk Management and Corporate Governance

Pass six subjects

Provides a solid understanding of risk management frameworks and compliance principles at an organisational and global level with practical application in the workplace

Associate and Fellow membership

Meet compulsory CPD requirements (for all Governance Institute Associate members)

For information regarding Governance Institute of Australia’s advanced certificate qualification please visit www.governanceinstitute.com.au → Learning → Postgraduate courses or contact National Education Manager (t) 1800 251 849 (e) [email protected]

Post Graduate

Graduate Diploma of Applied Corporate Governance*

Pass six subjects

Associate and Fellow membership

Post nominal AGIA or FGIA on successful completion and application for membership

Meet compulsory CPD requirements (for all Governance Institute members)

*You may be eligible to enrol in the Graduate Diploma outside of this pathway

For information regarding Governance Institute of Australia’s fully accredited post-graduate qualification please visit www.governanceinstitute.com.au → Learning → Postgraduate courses → Graduate Diploma of Applied Corporate Governance → Request our postgraduate education handbook or contact National Education Manager (t) 1800 251 849 (e) [email protected]

We suggest you explore Governance Institute’s study options with your chair, chief executive or director about how this training fits within the framework of your role and your organisation.

If you have any further questions please email: [email protected].



7 RESOURCES

A crucial part of the role of officers and directors of any organisation is to keep up-to-date with changes in legislation and regulations, current governance issues and debate. There are a variety of useful reference books, practice manuals, legal publishers’ subscription services and online resources available that are regularly updated as legislation, regulations, standards and guidelines change. The following sections provide some useful starting points for undertaking independent research into the areas of law and governance.

7.1 Legislation and regulators

Accessing legislation online

• Australian Government, ComLaw, www.comlaw.gov.au

• Australian Law Portal, www.lawportal.com.au

• Australasian Legal Information Institute (AustLii), www.austlii.edu.au

• ACT Government, ACT legislation register, www.legislation.act.gov.au

• Government of Western Australia, Western Australian legislation, www.legislation.wa.gov.au

• Government of South Australia, South Australian legislation, www.legislation.sa.gov.au

• New South Wales Government, NSW legislation, www.legislation.nsw.gov.au

• Northern Territory Government, Northern Territory legislation, www.dcm.nt.gov.au

• Queensland Government, Queensland legislation, www.legislation.qld.gov.au

• Victorian Government, Victorian legislation and Parliamentary documents, www.legislation.vic.gov.au

Regulatory websites

• Australian Government, Attorney-General’s Department, www.ag.gov.au

• Australian Government, Office of the Australian Information Commissioner, www.oaic.gov.au

• Australian Charities and Not-for-profits Commission, (ACNC), www.acnc.gov.au

• Australian Prudential Regulation Authority (APRA), www.apra.gov.au

• Australian Securities and Investments Commission (ASIC), www.asic.gov.au

– Regulatory resources - www.asic.gov.au/regulatory-resources/corporate-governance

– Publications – www.asic.gov.au/about-asic/corporate-publications

ᵒ Information Sheets

ᵒ ASIC Digest – ASIC Working Guide for Company Secretaries

ᵒ ASIC Policy Alert - Information sent out by ASIC Policy Alert can also be specifically tailored for company secretaries

– Company officeholder duties, this section describes the responsibilities of directors and company secretaries under the Corporations Act 2001 (Corporations Act).

• Australian Securities Exchange (ASX), www.asx.com.au

• Fair Work Commission, www.fwc.gov.au



Legal publishers/legal information providers

• CCH, www.cch.com.au

– Australian Corporate Practice Manual, CCH Australia (loose-leaf and online).

• LexisNexis, www.lexisnexis.com.au

– Australian Corporation Practice, (loose-leaf and online, updated five times per year).

– Australian Corporation Law: Principles and Practice, (hard copy and online).

– Australian Journal of Corporate Law, (hard copy or online).

– Butterworths Corporation Law Bulletin (BCLB), (loose-leaf, CD and online).

• Thomson Reuters, www.thomsonreuters.com.au

– Companies and Securities Law Journal, (hard copy and online).

7.2 Standards and guidelines • Auditing and Assurance Standards Board, ASA 102: Compiled Auditing Standard

• Australian Public Service Commission (APSC), 2007, Building Better Governance

• ASX Corporate Governance Council, 2014, Corporate Governance Principles and Recommendations, 3rd edn

• OECD, 2015 G20/OECD Principles of Corporate Governance

• Standards Australia, 2003, AS 8000-2003: Good Governance Principles

7.3 Governance Institute resources • Governance Institute of Australia publications, knowledge-resources/publications/technical

booklets:

We have provided a sample of our publications below:-

– Continuous Disclosure: Listed Public Companies and Other Disclosing Entities

– Corporate Governance and the Company Secretary

– Duties of Officers and Directors

– Protecting Company Officers.

• Governance foundations, knowledge-resources/governance-foundations/ Governance foundations provides a range of material to assist organisations to implement a governance framework which is suitable for its structure and also steps users through the tools which are required for both implementation and monitoring of a framework.



• Guidance & tools, knowledge-resources/guidance-tools/ Guidance & tools provides a wealth of practical governance guidance, including Good Governance Guides, Other guidance and Best practice governance documents.

– Good Governance Guides address areas not specifically covered by legislation and provide

governance best practice. The following are a sample of the guides useful for a company

secretary:

ᵒ Board papers

ᵒ Board minutes: what to record, the business judgment rule

ᵒ Issues to consider when recording and circulating minutes of directors’ meetings

ᵒ The appointment and reporting lines of the company secretary

• Governance Directions (journal of Governance Institute of Australia)

7.4 Reference books

Corporate law

• Adams M, 2001, Essential Management Law, 2nd edn, Cavendish Publishing.

• Adams M, 2005, Essential Corporate Law, 2nd edn, Cavendish Publishing.

• Austin R and Ramsay I, 2014, Ford’s Principles of Corporations Law, 16th edn, LexisNexis.

• Barker D, 2005, Essential Australian Law, 2nd edn, Sydney: Cavendish.

• Baxt R, Fletcher K and Fridman S, 2008, Corporations and Associations: Cases and Materials, 10th edn, LexisNexis.

• Griggs L, Clark E and Iredale I, 2010, Managers and the Law: A Guide for Business Decision Makers, 3rd edn, Thomson Reuters.

• Harris J, Hargovan A and Adams M, 2013, Australian Corporate Law, 4th edn, LexisNexis.

• Lipton P and Herzberg A, 2015, Understanding Company Law, 18th edn, Thomson Reuters, Lawbook Co.

• Terry A and Giugni D, 2016, Business and the Law, 6th edn, Thomson.

• Turner C, 2012, Australian Commercial Law, 29th edn, Thomson Reuters.

Governance

• Barclay M A, Kiel G and Nicholson G, 2005, Board, Director and CEO Evaluation, McGraw-Hill.

• Bartos S, 2006, Against the Grain: The AWB Scandal and Why It Happened, UNSW Press.

• Charan R, 2009, Owning Up: The 14 Questions that Every Board Member Needs to Ask, Jossey-Bass.

• Clarke T (ed), 2004, Theories of Corporate Governance, The Philosophical Foundations of Corporate Governance, Routledge.

• Du Plessis JJ, Hargovan A, Bagaric M,Harris J, 2014, Principles of Contemporary Corporate Governance, 3

rd edn, Cambridge University Press

• Farrar J, 2008, Corporate Governance: Theories, Principles, and Practice, 3rd edn, OUP.

• Kiel G C and Nicholson G J, 2003, Boards that Work: A New Guide for Directors, McGraw-Hill.

• Kiel G C, Nicholson G J and Barclay M A, 2005, Board, Director and CEO Evaluation, McGraw-Hill



• Larcker D F and Tayan B, 2011, Corporate Governance Matters: A Closer Look at Organisational Choices and Their Consequences, FT Press.

• Nadler D A, Behan B A and Nadler M B (eds), 2006, Building Better Boards: A Blueprint for Effective Governance, Jossey-Bass.

• Psaros J, 2009, Australian Corporate Governance: A Review and Analysis of Key Issues, Pearson Education.

• Tricker R I, 2012, Corporate Governance: Principles, Policies and Practices, 2nd edn, OUP.

7.5 Reports and journal articles • Australian Centre for Corporate Social Responsibility (ACCSR), 2016, Pathway to the Sustainable

Development Goals, Annual Review of the State of CSR in Australia and New Zealand.

• Corporations and Markets Advisory Committee (CAMAC), 2011, Executive Remuneration.

• Committee on the Financial Aspects of Corporate Governance, 1992, Report of the Committee on the Financial Aspects of Corporate Governance (Cadbury Report), Burgess Science Press.

• Carver J, 2002, John Carver on Board Leadership: Selected Writings From the Creator of the World's Most Provocative and Systematic Governance Model, Jossey-Bass.

• Corbett A and Bottomley S, 2004, Regulating Corporate Governance, in Parker C, Scott C, Lacey N and Braithwaite J (eds), Regulating Law, OUP.

• Department of Finance and Administration, 2005, Governance Arrangements for Australian Government Bodies, Canberra.

• HIH Royal Commission, 2003, The Failure of HIH Insurance, Commonwealth of Australia, Canberra.

• Kakabadse A, Kakabadse-Korac N and Khan N, 2014, The Company Secretary: Building trust through governance, ICSA and Henley Business School, www.icsa.org.uk/knowledge/research/the-company-secretary-report

• Kirkpatrick G, 2009, The Corporate Governance Lessons from the Financial Crisis, Financial Market Trends, OECD, www.oecd.org

• Prudential Regulation Authority, Bank of England, 2016, Supervisory Statement - SS5/16, Corporate governance: Board responsibilities, www.bankofengland.co.uk/pra/Documents/publications/ss/2016/ss516.pdf

7.6 Other resources • Australian Centre for Corporate Social Responsibility, www.accsr.com.au

• Australian Centre for Philanthropy and Nonprofit Studies (QUT), www.qut.edu.au

• Australian Institute of Management, www.aim.com.au

• Australian Public Service Commission, www.apsc.gov.au

• Centre for Corporate Law and Securities Regulation, www.cclsr.law.unimelb.edu.au

• CEO Forum Group, www.ceoforum.com.au

• Corporate Governance, www.corpgov.net

• European Corporate Governance Institute, www.ecgi.org

• Financial Services Council, www.fsc.org.au

• Global Governance Institute, www.globalgovernance.eu

• Governance and Management, www.governance.com.au



• Institute of Chartered Accountants Australia, www.charteredaccountants.com.au

• Institute of Public Administration Australia, www.ipaa.org.au

• International Corporate Governance Network, www.icgn.org

• UTS Centre for Corporate Governance, www.ccg.uts.edu.au



APPENDICES

Appendix 1 — Sample ‘Notice of agenda of directors’ meeting’

Appendix 2 — Recording minutes of directors’ meeting

Appendix 3 — Sample ‘Minutes of directors’ meeting’

Appendix 4 — Sample ‘Action List’

Appendix 5 — Sample ‘Minutes of a general meeting for a public unlisted or proprietary company’



Notes



READINGS

Reading 1 — Dabski S, Hartin T and Saffron R, 2014, ‘The dynamic company secretary in the post-GFC landscape’, Governance Directions, November issue, pp 602–606.

Reading 2 — Dembkowski S, 2015, ‘Raise the bar’, Governance Directions, October issue, pp 554–555.

Reading 3 — Donaldson R, 2016, ‘Non-executive directors’, Governance Directions, June issue, pp 298–301.

Reading 4 — Hayman R, Mihanovic M, Peregrine M, 2006*, ‘Corporate minute-taking: a general counsel’s guide’, Keeping good companies*, July issue, pp 326–329.

*In February 2014 Keeping good companies changed its name to Governance Directions



Notes


APPENDICES Appendix 1 — Sample ‘Notice of agenda of directors’ meeting’

Appendix 2 — Recording minutes of directors’ meeting

Appendix 3 — Sample ‘Minutes of directors’ meeting’

Appendix 4 — Sample ‘Action List’

Appendix 5 — Sample ‘Minutes of a general meeting for a public unlisted or proprietary company’


APPENDIX 1 Sample ‘Notice of agenda of directors’ meeting’

Visit our website at www.governanceinstitute.com.au to find more information on corporate governance

[Company name]Notice of Meeting of the [Board of Directors/ Board Committee/Management Committee]

Notice of AgendaFor a meeting to be held on [date], at [time] at [location].

Item number

Responsibility (optional) Paper

Action Required

2 Declaration of interests

2.1

2.2

Declaration of directors’ interests

Director trading activity (applicable to public listed companies only)

Name of person

Name of person

Paper no.

Paper no.

[action here]

[action here]

3 Minutes of the last board / committee meeting

3.2

3.3

3.4

Matters arising from previous meetings not covered elsewhere in the agenda

Action items

Noting circulating resolution (optional)

Name of person

Name of person

Name of person

Paper no.

Paper no.

Paper no.

[action here]

[action here]

[action here]

4 CEO or General Manager report

4.X

4.X

4.X

Legal and risk (optional)

Industry update (optional)

Related party transactions (optional)

Name of person

Name of person

Name of person if relevant

Paper no.

Paper no.

Paper no. if relevant

[action here]

[action here]

[action here]

5 Governance

5.X Governance and ASX announcements (optional) Name of person Paper no. [action here]

6 General business

[COMPANY NAME]

A.B.N. XX-XXX-XXX-XXX

This is a sample agenda. On the following pages, you will find explanations of the purpose of each element of the agenda. Some of the

elements of the agenda may require amendment for use as committee meeting agendas. The sample agenda should be read in conjunction

with Governance Institute’s sample minutes.

KEY

7 Meeting review (optional) Name of person

8 Next meeting

The next meeting of the [Insert Company Name] Board of Directors /

Board Committee / Management Committee will be held on [Date] and [Time] at [Address].

9 Closure

1 Welcome, present and apologies

PURPLE TEXT = items that are optional, according to company curcumstance

= Explanatory Notes These notes explain the purpose of each element of the minutes and are provided for education only. The explanatory notes should not appear in an angenda.


[COMPANY NAME]A.B.N. XX-XXX-XXX-XXX

Item number

Responsibility (optional) Paper

Action Required

It is good practice to list the agenda in a table format with item numbers attached as this provides easy reference for future actions and meetings.

The person tasked with responsibility for a particular agenda item may be noted here.

If a paper accompanies the agenda item, then the paper will be similarly numbered, eg if it is Agenda item 3.1, the paper will be called 3.1. If there is no paper, there may be a verbal report.

This should reflect what action the board of directors or committee members must take in relation to agenda items, eg, For resolution, For noting, For ratification. Governance Institute has a Good Governance Guide: Board matters: when to resolve, ratify or note, that explains these items.


[Company name]Notice of Meeting of the [Board of Directors/Board Committee/Management Committee]


1 Welcome, present and apologies

2 Declaration of interests2.1 Declaration of directors’ interests

Notice of AgendaFor a meeting to be held on [Date], at [Time] at [Location]

Providing the Company Name at the top of the document clearly identifies the function of the Company to which the meeting agenda

applies. Providing the title of the body that holds the meeting is essential for organisational records.

The agenda provides the board of directors or board committee with notice of the location, date and time of the meeting and the proposed

topics for discussion and resolution. While there is little detailed procedural regulation for convening directors meetings,

s 248C (a replaceable rule) of the Corporations Act 2001 Cth requires that a ‘directors’ meeting may be called by a director giving

reasonable notice individually to every other director’.

The purpose of an agenda is to table the relevant business of the meeting and to empower decision making be the directors of the board,

through providing notice of the matters which affect business.

Under s 251A of the Corporations Act, a company must keep minute books in which it records, within one month, the proceedings and

resolutions of directors’ meetings (including meetings of a committee of directors). It is necessary to record in those minutes the directors

who are present at the meeting, the relevant time that they join or leave the meeting, and those who send their apologies, so that it is clear

who was making decisions at the meeting. The minutes should also record other attendees at the meeting, the capacity in which they are

attending and may record the times at which they joined and left the meeting, as relevant. In order to facilitate the record in the minutes

of these involved in decision making on behalf of the organisation, the first agenda item will be a welcome of those present, and a note

of those who have proffered their apologies. Good corporate governance requires disclosure of director attendance at meetings in the

annual report.

Sections 191 and 192 of the Corporations Act 2001 provide standing items for directors (of both public and private companies) to make

various disclosures at directors’ meetings about matters in which they have a material personal interest when conflict arises. Section

195 prohibits directors of public companies from voting on matters in which they have a material personal interest. Directors are also

encouraged to ensure that they disclose at each meeting any material personal interests in any of the items on the agenda. This is a

personal and non-transferable obligation on directors — they have a positive duty to declare their interests. These matters could involve

a financial interest giving rise to a conflict of interest, or a perception of a conflict of interest, or they could be a conflict of loyalty, which

will not involve a financial interest, but which arise when a director has a competing loyalty between the organisation to which they owe a

primary duty as a director and some other person or entity. There is also an obligation under ss 182 and 183 of the Corporations Act 2001

for each director not to use either their position or information gained as a result of their position to gain an advantage for themselves

or someone else; or cause detriment to the company. See Governance Institute’s Good Governance Guide: Issues to consider when

developing a policy on disclosure of and voting on matters involving a director’s material personal interests.



resolutions of directors’ meetings (including meetings of a committee of directors). The company must also ensure that the minutes of a

directors’ meeting are signed by the chair of the meeting (or the chair of the next meeting) within a reasonable time. If minutes are recorded

and signed in this way, they are evidence of the proceedings and resolutions passed, unless the contrary is proved (s 251A(6) provides that

a minute which is recorded and signed is prima facie evidence of the proceeding, resolution or declaration to which it relates).

Directors will discuss items in the minutes of the last board or committee meeting in conjuncture with the action items list (see below).

This relates to the dynamism of the issues which are captured in the board minutes. Directors need to be apprised of matters affecting

their authority and oversight which in turn allows them to demonstrate adherence to their duties as directors. Directors are able to keep

their fingers on the pulse of matters, by noting the progress of matters since the previous meeting, even when those matters are not

included on the agenda of the current meeting, It is good practice for matters arising to cover only matters upon which a watching brief has

been maintained, as any matters which required a further specific action should be covered off under the heading ‘Action Items’ or should

be included on the agenda.

The action items list is the mechanism by which the board keeps abreast of what it has resolved and to whom it has delegated those

resolutions at previous board meetings. The action items list notes who is required to undertake a particular action, when the action

is required to be undertaken or completed and may also note how the action is to be performed. Section 198A(1) (replaceable rule) of

the Corporations Act provides that the business of the company is to be managed by or under the direction of the directors; that is, the

directors are to exercise all the powers of a company except any that the law or the company’s constitution (if any) requires the company

to exercise in general meeting. Companies have clauses in their constitutions that allow the directors broad ability to delegate their

collective powers, but not their duties, which under both common law and statute, are non-delegable. This means, in accordance with

s 198D(3), that the exercise of power is as effective as if the director had exercised it. The action items list provides a procedure for this

delegation to occur and for reporting to the board as to the success or otherwise of that delegation.

It is good practice for the company secretary to send out a copy of the action items list prior to the directors’ meeting to the relevant

parties nominated in the action items list to allow them to update and/or attend to any tasks which are outstanding.

Section 248A of the Corporations Act (a replaceable rule for companies with more than one director) provides that directors may pass a

resolution without a directors’ meeting being held if all directors who are eligible to vote on the resolution sign a document containing a

statement that they are in favour of the resolution set out in the document. The resolution is passed when the last director signs it. Many

company constitutions allow for a majority of the directors to pass a circulating resolution as it can be difficult to obtain the consent of all

directors in a short time frame when a meeting is not held, and quick action is required. By providing notice of the circulating resolutions

which have been passed during the intervening period between directors’ meetings, this item provides that all the resolutions made are

captured in the minutes.

It is important that the agenda stipulate which resolutions are for noting, ratification or resolving, see Governance Institute’s Good

Governance Guide: Board matters: when to resolve, ratify or note.

3 Minutes of the last board / committee meeting

3.2 Matters arising from previous meetings not covered elsewhere in the agenda

3.3 Action items

3.4 Noting circulating resolution (optional)

2.2 Director trading activity (applicable to public listed companies only)

The Corporations Act prohibits ‘insider trading’ generally (ss 1042 and 1043) and the ASX Listing Rules and Corporations Act require

notification to the market by directors where particular dealings change their relevant interest in the entity’s securities. It is good practice

therefore for directors of public listed companies to disclose to the meeting any trading in securities of the company of which they are

a director.


At each directors’ meeting, the CEO, managing director or general manager of the organisation must report to the directors on a variety of

matters. As noted above, directors can delegate their collective powers to manage the business of the company but not their responsibility,

and so in order to fulfil their directors’ duties they must be properly briefed about the financial performance, key performance indicators

and operations of the company, including the alignment of those matters with the strategy set by the board. Reports should cover:

• the key financial metrics, which includes cash flow, liquidity ratios, debtors and receivers and how financial performance is tracking

against the budget

• any major contractual matters

• occupational health and safety reports

• any matters pertaining to key personnel that are relevant any substantial operational issues (for example, the roll-out of a new

information technology platform)

Importantly, a key responsibility of directors is to scrutinise company accounts. The Centro decision confirmed not only the importance

of the annual accounts but also the fact that the Corporations Act places specific responsibilities upon directors in relation to the accounts

means that directors cannot delegate those responsibilities. The Centro decision also confirmed that directors cannot substitute reliance

upon the advice of management for their own attention and examination of an important matter that falls specifically within the board’s

responsibilities. The Act places upon the board and each director the specific task of approving the financial statements.

Directors of all companies should be conscious of their governance obligations. An agenda item such as this provides the opportunity

for directors to note share registry activity, any action on option plans, and updates to charters or policies, for example. Directors’ trading

activity may be noted here if there is not a separate agenda item dedicated to it. Directors of public listed companies also need to be

aware of their continuous disclosure obligations under the Corporations Act and ASX Listing Rule 3.1. Discussion under this item must

consider whether any material discussed during the meeting needs to be disclosed to the ASX in line with the company’s continuous

disclosure obligations.

Some companies choose to maintain legal and risk as a standing item on the board’s agenda. This is to ensure that the company’s legal

and risk register is adequately maintained. Such an agenda item would include contingent or actual liabilities in relation to potential

litigation. It should be noted that while the board has oversight of and reviews the management of risk within the organisation, it is the

senior managers who are responsible for the management of risk within the organisation. Risk should, of course, be aligned with the

strategy at the board level.

Where a company does not distribute intra-meeting updates, a company may wish to provide a forum in which discussion about the

issues relevant to the industry can be discussed. The purpose of this item is to ensure that directors remain briefed about any issues

which current affect their particular industry.

Related party transactions may occur independently of directors’ interests. This agenda item allows for the disclosure, discussion and

consideration of related party transactions, so that the directors may assess whether shareholder approval is required or an exemption

applies in relation to the transaction.

4 CEO or general manager report

4.X Legal and risk (optional)

4.X Industry update (optional)

4.X Related party transactions (optional)

5 Governance5.X Governance and ASX announcements (public listed companies only)


The agenda should provide an item whereby anything else which has not been included elsewhere on the agenda but which is of relevance

either to the directors or the company and its members can be discussed or noted. This can include any issues specific to contracts or

members, or an issue that directors may wish to raise. Business without notice can only be raised with consent.

The board of directors may wish to conduct an evaluation of the meeting to assess whether everything on the agenda was discussed adequately,

and whether the meeting was properly conducted and in a timely manner. The purpose of this agenda item is continuous improvement.

Each board meeting should conclude with confirmation of the date of the subsequent meeting, thereby providing reasonable notice to the

directors. It is good practice to circulate to the board of directors the proposed meeting dates for the forthcoming year well in advance of

the end of the year. This provides the directors with the opportunity to plan ahead.

The time at which the meeting concludes should be noted in the minutes, as the minutes need to record the details of the timing of the

meeting to ensure they are correct record of the events that occurred. This agenda item provides for such notice.

6 General business

7 Meeting review (optional)

8 Next meetingThe next meeting of the [Insert Company Name] Board of Directors / Board Committee / Management Committee will be

held on [Date] and [Time] at [Address]

9 Closure


APPENDIX 2 Recording minutes of directors’ meeting

Management and oversight

© Governance Institute of Australia 2014. This material is subject to copyright. The Good Governance Guides indicate, in the view of Governance Institute of Australia Ltd, one interpretation of good practice. They are not designed to cover or comply with all applicable legislation or case law. We cannot be held liable or accountable to any person who acts or relies upon the information provided. The guides are not a substitute for professional advice. Visit our website at governanceinstitute.com.au to find more Good Governance Guides and information on governance.

Good Governance GuideRecording minutes of directors’ meetings

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Under 251A of the Corporations Act, a company must keep minute books in which it records, within one month, the proceedings and resolutions of directors’ meetings (including meetings of a committee of directors). The company must also ensure that the minutes of a directors’ meeting are signed by the chairman of the meeting (or the chairman of the next meeting) within a reasonable time. If minutes are recorded and signed in this way, they are evidence of the proceedings and resolutions passed, unless the contrary is proved.

In most companies, the minutes of the previous board meeting are formally approved at the subsequent board meeting. However, in many companies, the board does not meet each month, but may meet every two months or at other periods. These companies need to ensure that they have a process in place to satisfy the demands of the legislation when the next scheduled meeting is not within one month of the board meeting.

It is good governance to develop and implement a process to facilitate the entering of the minutes into the minute book within one month of the meeting, in order to ensure that a recording of the directors’ meeting is made while memory of the meeting is fresh.

• The chairman should agree with the board members, CEO and company secretary upon a procedure for reviewing of the draft minutes.

• Once in receipt of the draft minutes, the chairman should review them and note any amendments that may be required within the time period agreed in the procedure.

• The draft minutes should then be approved by the chairman and any other person specified in the policy (for example, the CEO)

• If the next meeting is not within one month of the board meeting, the minutes as approved by the chairman should be entered in the minute book.

• The minutes should always be formally approved at the next meeting if they have not previously been formally approved by all the members of the board.

• If the minutes are amended at the next board meeting, this should be reflected in the minutes of the subsequent meeting.

• The original minutes with the amendments noted should be retained to demonstrate compliance with s 251A and to avoid any suggestion of destruction of company records in contravention of ss 1306 or 1307 of the Corporations Act.

Companies need to decide the approach most suitable to their circumstances.


APPENDIX 3 Sample ‘Minutes of directors’ meeting’


[COMPANY NAME]


These are sample minutes. Each heading is accompanied by an explanation of the purpose of each element of the minutes.

The sample minutes should be read in conjunction with Governance Institute’s sample agenda.

PURPLE TEXT = items that are optional, according to company curcumstance

KEY = Explanatory Notes

These notes explain the purpose of each element of the minutes and are provided for education only. The explanatory notes should not appear in an angenda.

As the minutes are evidence of the proceedings and resolutions passed by the directors present, they must include a list of those directors

in attendance at the meeting. The minutes should also record the relevant time that directors join or leave the meeting, and those who send

their apologies due to other commitments, so that it is clear who was making decisions at the meeting. The minutes should record other

attendees at the meeting, the capacity in which they are attending and may record the times at which they joined and left the meeting, as

relevant. Good corporate governance requires disclosure of director attendance at meetings in the annual report — the minutes will provide

this record.

Where directors are unable to attend the meeting in person, s 248D of the Corporations Act allows directors’ meetings to be called or held

using any technology which has the consent of all the directors. The consent may be a standing consent, and a director may only be able

to withdraw their consent a reasonable time before the meeting commences. The minutes should reflect whether the directors attended

the meeting in person or through the use of technology. It is good practice to have those attending by phone announce themselves at the

commencement of the meeting and in some cases the constitution may provide for this to occur.

1 Attendance

MinutesMinutes for a meeting of the Board of Directors of [Company Name] held on [Date], at the [Location] commenced at [Time]

PresentExample: Mr John Smith

PositionChair

The minutes of the meeting provide the primary evidentiary source of the events that occurred. Under s 251A(6) of the Corporations

Act 2001 (Cth), proceedings entered into a company’s minute book and properly signed are prima facie evidence of the proceedings.

It is important, therefore, that details concerning the timing and location of the meeting are correctly recorded. The primacy of company

minutes has been reinforced by the recent court decision in James Hardie.

Importantly, the minutes must be an accurate record of the meeting. It is important that the minutes reflect the agenda of the meeting.

A director cannot bring new business before a meeting of the board without notice or the consent of the directors, as all directors must

have reasonable notice of the meeting and the items to be discussed. Short notice can be provided, but all directors must consent to it.

Please refer to Governance Institute’s sample agenda where we explain each element of an agenda.

It is also important to number the pages of the minutes for easy reference. A decision needs to be taken as to whether the page numbers

will be consecutive, which can be useful from an audit perspective, as it ensures there are no duplicated page numbers. A decision also

needs to be taken as to whether the chair will sign and date each page of the minutes, or sign and date the final page of the minutes, and

initial the other pages. Both approaches are acceptable — what is important is that the company can provide comfort that the version of

the minutes entered in the minute book is the correct record that has been signed by the chair.

Providing the company name at the top of the document clearly identifies the identity of the organisation of whose meeting the minutes are

a record. Providing the title of the body that holds the meeting is essential for organisational records.

[Company name][PUBLIC COMPANY] Board of Directors


Chair

The Chair, [name], declared the meeting open at [time] and that a quorum was present.

2 Declaration of interests2.1 Declaration of directors’ interests

[Name of individual director] declared that s/he had an interest in [Explanation]

[Name of individual directors] declared that [Explanation] which might affect their relationship with [Company Name] regarding matters to

be discussed during the meeting.

In attendance

Apologies

The minutes should also reflect those directors who send their apologies and those apologies should be noted to the directors present.

The minutes should list the other attendees at the meeting, including executive officers of the company. The minutes also record the

minute taker for the meeting, who is usually the company secretary.

The chair will always declare the meeting to open at a particular time. The requirements for a quorum for business to be properly discussed

and resolved at a meeting is usually determined by either the terms of the company’s constitution or s 248F (a replaceable rule) of the

Corporations Act which requires at least two directors to be present. A quorum must be maintained throughout the entire duration of the

meeting — it is important that the requirement for a quorum is considered when directors leave the meeting for any particular reason as

the decisions made by the board can be procedurally challenged if it is subsequently revealed that a quorum is not present. There are

exceptions to this for public companies (see ss 191(4) and 195(5) of the Corporations Act). It is also important to note that s1322(2) and

(4)(a) of the Corporations Act provide a general power of relief in circumstances where an irregularity arises. These sections are of last

resort and good governance dictates that it is paramount that proper meeting practice and procedure be followed.

It is important that the minutes are always written in the past tense, as they a historic record and not a forward-looking document. It is also

preferable to use the active voice rather than the passive voice when recording minutes (for example, ‘The chair declared the meeting open,

rather than ‘The meeting was declared open by the chair’.)

Directors (but not other officers) who have a material personal interest in a matter that is being considered or will be considered at the

meeting of the board or its committee, or a conflict or perceived conflict between the duties which the director may owe to another entity

of which they are a director or salaried executive and their duties as a director of the company in considering a matter than is brought

before a meeting of the board, must disclose that interest to the other directors (as provided for in s 191 of the Corporations Act) unless

a s 191(2) exception applies. Upon being appointed as a director, it is good practice for a director to disclose their material personal

interests in a ‘standing notice’. The entity should set out the guiding principles for the disclosure of those interests. The standing notice

should provide details of the nature and extent of the interest and how the interest relates to the affairs of the company and recorded in

a register of interests.

Directors should be asked to consider at the commencement of the meeting if they have a conflict of interest in relation to any of the items

on the meeting agenda. If they do, the meeting must then determine the extent to which the director may or may not participate in the

discussion and vote on that matter (s 195). Any declared conflicts of interest and board decisions relating to these must be recorded in the

minutes. It is general meeting protocol that when the matter of business is tabled, the directors remain silent, unless there is a change to

the extent or nature of their standing notice.

Listed companies should consider any shareholder approval requirements, disclosure requirements or voting restrictions set out in the

ASX Listing Rules concerning directors having a notifiable interest in a relevant contract with the company or by being a party or otherwise

connected to a transaction with the company that is subject to the ASX Listing Rules.


2.2 Director trading activity (applicable to public listed companies only)

3.2 Matters arising from previous meetings not covered elsewhere in the agenda

3.3 Action items

3 Minutes of the last board / committee meetingThe minutes of the [Name] board meeting held on [Date] were adopted and signed by the Chair

It is a personal statutory obligation on directors to disclose conflicts of interest — they cannot rely on the chair to bring their attention to

the requirement for them to disclose any actual or perceived conflict of interest.

For more information, please see Governance Institute’s Good Governance Guide: Issues to consider when developing a policy on

disclosure of and voting on matters involving a director’s material personal interests.

The Corporations Act prohibits insider trading and the misuse of company knowledge and information for personal gain. The ASX Listing

Rules and Corporations Act require notification to the market by directors where a dealing changes their relevant interest in the entity’s

securities. Notwithstanding that, a person in the position of director, officer or employee must not use confidential information or

improperly use their position to gain an advantage for themselves or another cause detriment to the company.


resolutions of directors’ meetings (including meetings of a committee of directors). In most companies, the minutes of the previous board

meeting are formally approved at the subsequent board meeting. However, in many companies, the board does not meet each month, but

may meet every two months or at other periods. These companies, therefore, need to ensure that they have a process in place to satisfy

the demands of the legislation when the next scheduled meeting is not within one month of the board meeting. For more information

please refer to Governance Institute’s Good Governance Guide: Recording minutes of directors’ meetings.

The minutes must be signed by the chair of the meeting — it can be the chair of either the previous meeting or the current meeting before

which the minutes have been tabled. When the board of directors authorises the chair to sign the minutes of the previous meeting as an

accurate record of that meeting, the last page of the minutes should be properly structured to record that fact. For example, a statement

might indicate that the minutes have been signed as a true and correct record of the meeting and that the chair is authorised to sign them

(including the chair’s name) on the appropriate date.

The minutes will capture the progress of matters since the previous metting, even when those matters are not included on the agenda of

the current meeting.

The action items list is the mechanism by which the board keeps abreast of what it has resolved and to whom it has delegated those

resolutions at previous board meetings. The action items list notes who is required to undertake a particular action, when the action is

required to be undertaken or completed and may also note how the action is to be performed. Some of the items on the action list will

be included on the agenda of the current meeting, and will therefore be dealt with and recorded in the minutes under that agenda item.

The minutes must record each action item, any progress or otherwise in relation to it and any further resolutions made by the directors in

realtion to it.

The action items list may be set out in a table format, as an attachment to the minutes, and include the following:

• an item number that correlates to the number on board agenda noting the business matter (for ease of reference)

• a summary and description of the item upon which action is required

• an assignment of the responsibility to a particular director, executive, or branch of the company

• an indication as to the ongoing status of the action item, and/or

• the deadlines which are relevant to the performing of actions


4.1 CEO or General Manager report

4 [Agenda items]

3.4 Noting circulating resolution (optional)

The minutes may capture notice of the circulating resolutions which have been passed during the intervening period between

directors’ meetings.

A company’s minutes should reflect the order of the agenda of the previous meeting. The minutes should also reflect what action the board

of directors or committee members took in relation to each agenda item, that is, For decision; For noting, For ratification. See Governance

Institute’s Good Governance Guide: Board matters: when to resolve, ratify or note.

Minutes of resolution will simply record that an agenda item was discussed and a resolution passed. Minutes of narration may choose to

provide more information about the issues under consideration and the deliberations of the directors in arriving at the resolution. However,

it is common practice to omit from the minutes extraneous material such as discussion, lost amendments, unseconded motions and

procedural motions.

Directors’ minutes must record the passing of a resolution as the collective will of that body and adequately record the process followed

in coming to that business decision, whether it be to take or not to take certain action. Individual directors are not named in relation to

resolutions — it is unitary decision. There is no one-size-fits-all approach to choosing which style of the minutes are appropriate for all

organisations, but it is common for the minutes of public companies to be more in the style of minutes of resolution. Importantly, minutes

should not record every aspect of the discussion in relation to any particular matter, nor any record of which director made which comment

on the issue.

A ‘happy medium’ between pure minutes of resolution and minutes of narration is likely to be appropriate for modern corporate practice.

Boards will ultimately make the decision as to their preferred mode of recording minutes and the extent to which additional information

regarding board discussions is contained within them.

To ensure that the business judgement rule under s 180(2) of the Corporations Act can apply, it is important that the minutes reflect

the fact that the directors turned their mind to the issues contained on the agenda, acted in good faith, for a proper purpose and in the

absence of a material personal interest, and came to a rational decision which was reasonable for each of them to reach, in light of their

own skills and experience and in light of circumstances known to the company at the time. The company’s directors’ and officers’ insurance

should also be considered. See Governance Institute’s Good Governance Guide: Board minutes: what to record, the business judgment rule.

Only in very limited situations should individual comments by directors expressing dissent with the collective decision of the board be

captured by the minutes, if a director so requests. As noted, a board should function cohesively in unity.

When recording the minutes in relation to each agenda item, it is good practice to note if a paper was presented to the board for

consideration. It is good governance to ensure that a folder is maintained for each board meeting which includes an original set of board

papers including copies of all documents tabled and presentations given at the meeting. See Governance Institute’s Good Governance

Guide: Board papers.

Some specific comments in relation to regular agenda items are provided below.

At each directors’ meeting, the CEO, managing director or general manager of the organisation must report to the directors on a variety

of matters. It is usual for the CEO ‘s report to be included in the board pack abd discussed at the meeting. Section 198A(1) (replaceable

rule) of the Corporations Act 2001 provides that the business of the company is to be managed by or under the direction of the directors;

that is, the directors are to exercise all the powers of a company except any that the law or the company’s constitution (if any) requires

the company to exercise in general meeting. Companies have clauses in their constitutions that allow the directors broad ability to

delegate their collective powers, but not their responsibility, to others. See Governance Institute’s Providing your board with comfort on the

accountability mechanisms operating in your company.

The minutes must record the report to the directors by those to whom it has delegated its powers. See Governance Institute’s sample

agenda for a list of the reports from the CEO or general manager that the directors would expect to receive, and which will be recorded in

the minutes.


6 GovernanceDirectors’ discussion

Example the CEO [name] and CFO [name] left the meeting

The directors held a discussion without management present

The CEO [name] and CFO [name] rejoined the meeting

7 General business

8 Meeting review (optional)

5 Committee [name] reports

4.2 Financial report

The minutes should record that the directors considered the financial accounts at each meeting. The financial accounts should be

discussed at the meeting.

The minutes should also contain a record of the reports received from the board’s committees, such as the audit, remuneration and

nomination committees. This ensures that the delegations made by the board to its committees receive appropriate oversight and that

the board takes responsibility for any resolutions arising from committee deliberations. For example, the audit committee may scrutinise

the company accounts and make recommendations to the board but the Corporations Act places upon the board and each director the

specific task of approving the financial statements and this responsibility cannot be delegated to a committee. Each committee may not

necessarily report to the board at each directors’ meeting.

Importantly, while the board retains ultimate responsibility for the management of risks within the entity, it can delegate the day-to-

day management function of risk to management. The board is responsible for reviewing the company’s policies on risk oversight and

management, settling the risk appetite, and satisfying itself that management has developed and implemented a sound system of risk

management and internal control. The board should require management to report to it on whether the company’s material business risks

are being managed effectively. The board may wish to have the risk register tabled at each meeting (otherwise, each quarter, as a general

rule) and this would be recorded in the minutes.

In order to demonstrate the independence of the board from management, or where there are instances of potential conflicts of interest,

such as any discussion of CEO remuneration, the non-executive directors may request management to leave the room. The minutes should

record the name and title of the party requested to leave the room, and may record the time at which they left and rejoined the room,

although there could be concern that showing the times may misinterpreted as inadequate consideration by the directors of the matters

under discussion. It is common for the non-executive directors to hold discussions without management present following the report from

the audit committee on the financial statements. It is also common for the non-executive directors to hold a discussion with the auditors

without management being present when the financial statements are presented to the board.

The minutes should record that the chair invited all those present to raise any matters of relevance that have not been dealt with

on the agenda and any resolutions or noting of discussion that ensued in relation to those items of business should any be raised.

Otherwise the minutes should record that there were no other items of general business raised. Business without notice can only be

raised by consent.

If the board of directors has chosen to include evaluation of the meeting on the agenda, to assess whether everything on the agenda was

discussed adequately and efficiently, and whether the meeting was properly conducted and in a timely manner, the minutes should record

that such an evaluation took place and any resolutions arising from that discussion.


9 Next meetingThe next meeting of the [insert company name] Board of Directors / Board Committee will be held on [date] at [time] at [address].

10 ClosureThere being no further business, the Chair closed the meeting at [Time].

Each board meeting should conclude with confirmation of the date of the subsequent meeting, thereby providing reasonable notice to the

directors. The minutes should record the date of the next meeting. The board calendar is settled at the beginning of the year and should

stand as an attachment to the agenda and minutes as a running notice.

The time at which the meeting concludes should be recorded in the minutes. The minutes record when the meeting commences and

finishes, as details of the timing of the meeting are part of providing an evidentiary source of the events that occured.


APPENDIX 4 Sample ‘Action List’


[COMPANY NAME]


[Company name]Action items listFor a meeting of the [Board of Directors/ Board Committee/Management Committee] held on [date] at [address].

Item number

Minute number Action item

Responsible person Status

Proposed / actual date of completion

1 [Insert number, for

example, 5029

(March13)]

[Agenda item/

topic heading,

for example,

half-year report:

Contact auditors

to discuss the

half-year report

requirements and

fee estimate; or

Company details:

X to update ASX

and ASIC with new

company address]

[Person

responsible]

Complete [Date]

2 [Insert number] [Agenda item/topic

heading]

[Person

responsible]

Complete [Date]


heading]

[Person

responsible]

Agenda item [insert number] [Date]


heading]

[Person

responsible]

80 per cent complete [Date]


heading]

[Person

responsible]

Deferred to December meeting

as dependent on [insert relevant

information]

TBC

This is a sample action items list. On the following pages, you will find explanations of the purpose of each element of the action items list. The

sample action items list should be read in conjunction with Governance Institute’s sample minutes.

(These notes explain the purpose of each element of the action

items list and are provided for education only. The explanatory

notes should not appear in an action items list.)

KEY



Item number

Minute number Action item

Responsible person Status

Proposed / actual date of completion

It is good

practice

to have a

distinct

item

number

for each

action

item in the

list (for

ease of

reference).

A reference to the

minutes of the

particular board

meeting at which

the action item

arose ensures

that the directors

or committee

members or other

relevant parties,

such as the

company secretary

or CEO, can refer

to the resolution

or discussion in

the minutes for

the context of the

action item.

The action item

has arisen from

the discussion or

resolution taken

by the board at a

particular board

meeting and is

often expressed

in summary form

or by a shortened

topic heading.

The action items

listed should be

those not just

from the previous

board meeting, but

also from earlier

meetings that

have been carried

forward, as well as

anything that has

been completed

since the last

board meeting

was held.

This nominates

the person to

whom a particular

action list item

is delegated.

This person (for

example, the

CEO) may in turn

delegate the action

to their direct

reports.

For each meeting this should

reflect the current status of

the action item (for example,

complete, or 80 per cent

complete), or whether the

action item is included on the

agenda of the current board

meeting. Showing which action

items have been completed

since the previous board

meeting provides the directors

with confidence that all action

items have been appropriately

dealt with. If the action item

appears on the agenda of the

current meeting, then this

should be noted as it will be

dealt with during the meeting

rather than in the review of the

action list item. Frequently,

the person responsible will

report to the board meeting on

progress. If an action item is in

progress, then this should also

be noted. If an action item sits

on the action list for a number

of meetings, showing only a

small percentage of progress

(for example, 30 per cent), the

board can seek an explanation

as to why progress has stalled.

There may be a good reason

for this, as circumstances may

have changed, or the matter

may have become irrelevant, or

it may signal a lack of attention

— it is important for the board

to understand the reasons so

it may make a decision as to

whether to take the action item

off the list, or allocate further

resources, or seek to address

the action.

The board should decide on a

proposed date of completion

of each action item. This may

be a specific date, or ‘The next

board meeting’ or, in some

circumstances, ‘ASAP’. For

each meeting, until the status

is complete, it is appropriate

to record the proposed date

of completion, as this also

signals progress or otherwise

of the action item. The date

of completion should be used

when an action item has been

finalised. Once the completion

of an action item has been

recognised by the board and

noted in the minutes,

it can come off the action list.

It is then entered in the archive

list of completed actions. The

minutes must always reflect

that an action has been

completed if this

has occurred.


[Company name]Action items list of the [Board of Directors/Board Committee/Management Committee]

Providing the company name at the top of the document clearly identifies the function of the company to which the action list applies.

Providing the title of the body that holds the meeting is essential for organisational records.

The action items list should detail the location, date and time of the meeting at which the action item list will be discussed. This ensures

that the action items list is relevant, current and can be cross referenced for future meetings.

Although there are no specific legislative provisions which require a company to maintain an action items list, it should be noted that ‘action

items’ derive from the minutes of a previous meeting and are captured within the s 251A requirements of the Corporations Act 2001 to

table and approve minutes in subsequent meetings. It is, therefore, good and common practice to adopt a framework within which the

directors or relevant committee of a company can ensure that matters which have previously arisen are progressing towards completion.

The action items list provides a mechanism by which the board or committee can keep abreast of either the matters that it has resolved

and to whom it has delegated those resolutions at previous board or committee meetings, or issues under consideration on which the

board or committee is expecting further reporting or action.

Broadly, s 198A(1) (replaceable rule) of the Corporations Act 2001 provides that the business of the company is to be managed by or under

the direction of the directors; that is, the directors are to exercise all the powers of a company except any that the law of the company’s

constitution (if any) requires the company to exercise in general meeting. Companies have clauses in their constitutions that allow the

directors the broad ability to delegate their collective powers, but not their duties, which under both common law and statute, are non-

delegable. This means, in accordance with s 198D(3), that the exercise of power is as effective as if the director had exercised it. The action

items list provides a procedure for this delegation to occur and for reporting to the board or relevant committee as to the success or

otherwise of that delegation.

The action item list notes who is required to undertake a particular action, when the action is required to be undertaken or completed and

may also note how the action is to be performed. Some of the items on the action list will be included on the agenda of the current meeting

and will, therefore, be dealt with and recorded in the minutes under that agenda item.

The action item list will usually be a standing agenda item on the agenda for meetings. In accordance with s 251A of the Corporations Act

2001, the minutes must record, therefore, each action item, any progress or otherwise in relation to it and any further resolutions made by

the directors or committee members in relation to it.

It is good practice for the company secretary to send out a copy of the action items list to the relevant parties to whom responsibility

for actions has been delegated prior to the board or committee meeting to allow them to update and/or attend to any tasks which are

outstanding.


Action items list

Notice of AgendaFor a meeting of the [Board of Directors/ Board Committee/Management Committee] held on [date] at [address].


APPENDIX 5 Sample ‘Minutes of a general meeting for a public unlisted or proprietary company’


[COMPANY NAME]


These are sample minutes for a general meeting of members of an unlisted public or proprietary company. These sample minutes are not intended to provide guidance for all types of companies or organisations, as various entities will have specific requirements. Similarly, these sample minutes are not specific for an annual general meeting (AGM) which, again, may have specific requirements depending on the type of entity conducting the meeting.

KEY = Explanatory Notes

(These notes explain the purpose of each section of the meeting and are provided for education only. The explanatory notes should not appear in any run sheet.)

Minutes of a general meeting of members for a public unlisted or proprietary company

Providing the company name at the top of the document clearly identifies the function of the company to which the meeting minutes

applies. Providing the title of the body that holds the meeting is essential for organisational records.

Minutes of a meeting of members of [company name] held on [date], at the [location] commenced at [time]

The minutes of the meeting provide the primary evidentiary source of the events that occurred. Under s 251A(1) and (6) of the Corporations Act

2001 (the Act), proceedings entered into a company’s minute book within one month of the meeting and properly signed within a reasonable time

after the meeting by the chair or the chair of the next meeting (s251A(2) are prima facie evidence of the proceedings. It is important, therefore,

that details concerning the timing and location of the meeting are correctly recorded.

Chair

The chair, [name], declared the meeting open and noted that a quorum was present.

The starting point for a meeting of members is to elect a person to chair the meeting. The chair for a general meeting of members is either

elected by the directors prior to the meeting or by members at the meeting. If the board has not resolved a chair for the meeting, then the

responsibility falls to the members of the meeting to elect a chair for the meeting. The constitution may stipulate meeting practice and

procedure as to this.

It is the chair’s responsibility to declare the meeting open at a particular time. The requirements for a quorum for business to be properly

discussed and resolved at a meeting is usually determined by either the terms of the company’s constitution or s 249T (a replaceable

rule) of the Act which requires at least two members to be present. A quorum must be maintained throughout the entire duration of the

meeting — it is important that the requirement for a quorum is considered when members leave the meeting for any particular reason,

as the decisions made by members can be procedurally challenged if it is subsequently revealed that a quorum was not present and any

resolution may be declared invalid and not capable of being implemented under s1322(1)(b)(i), (2) and (4)(a). Where technology facilitates

the members’ meeting being held at multiple venues, companies should be mindful of ensuring an appropriate audit trail exists which

evidences that a quorum was present at all times of the meeting. For example, this might involve asking all members to announce their

attendance, with members also announcing whenever they join or leave the meeting (if the technology provider does not already have a

system in place).

Where there may be procedural irregularities, such as the lack of a quorum at a meeting, the Act proscribes a general power of relief on

declaration by a court as set out above. These are, however, sections of last resort and good governance dictates that it is paramount that

proper meeting practice and procedure be followed.

[Company name]


Attendance

Present

Example: Mr John Smith

It is good governance practice to include in the minutes a list of those members in attendance at the meeting, and the relevant times at

which they joined or left the meeting, so that it is clear as to votes cast by members entitled to vote on a resolution or matters of business

discussed.

The Act allows for companies to hold members’ meetings in multiple venues through the use of technology as available and relevant. The

minutes ought to record whether members attended the meeting in person or through other forms of technology media. All attendees by

the use of technology should announce their appearance and this should be minuted. The constitution may provide for this.

Apologies:

The minutes should also reflect those members who send their apologies.

In attendance:

This item should capture the other attendees at the meeting, who are not members of the company, such as auditors and officers

by invitation.

Minutes of the previous meeting

The minutes of the [company name] meeting of members held on [date], being in order, were signed by the chair and are tabled for the

information of members.

Under s 251A of the Act, a company must keep minute books in which it records, within one month, the proceedings and resolutions of

meetings of the company’s members.

For many companies, members do not meet each month. These companies, therefore, need to ensure that they have a process in place to

satisfy the demands of the legislation when the next scheduled meeting is not within one month of the previous meeting of members. It is

not appropriate for the minutes to remain unsigned and unresolved between meetings of members. Instead, consideration should be given

to having a process where the minutes are resolved by the board of directors, signed by the chair and recorded in the company’s minute

book within a reasonable time — see Governance Institute’s Good Governance Guide: Recording minutes of directors’ meetings.

The minutes must be signed by the chair of the meeting, either the previous meeting or the current meeting before which the minutes have

been tabled. Signing the minutes of the previous meeting records those minutes as an accurate record of that meeting; the last page of the

minutes should be properly structured to record that fact. For example, a statement might indicate that the minutes have been signed as a

true and correct record of the meeting having read and accepted them and that the chair was authorised to sign them (including the chair’s

name) and the date.

At the next meeting of members, the minutes may be tabled. There should be no discussion or resolution of the minutes. Members are

invited to inspect the minutes; however, amendments or changes are not permitted.

Declaration of interests

[Name of individual member] declared that s/he had an interest in [explanation].

While the notice of meeting will usually provide some outline of voting exclusions and any conflicts of interest, a standing notice declaring

the interests of various members should still be tabled at the meeting. It should be noted that the obligation rests on the relevant member

to ensure that the standing notice is correct, and to make disclosures as necessary to vary the nature of the standing notice.


Business of the meeting

A company’s minutes should reflect the order of the business of the meeting as set out in the notice of meeting and agenda of business.

Importantly, the minutes must also be an accurate record of the meeting.

The minutes should also reflect what action members took in relation to each agenda item. See Governance Institute’s Good Governance

Guide: Board matters: when to resolve, ratify or note.

While members at a general meeting do not owe a specific fiduciary duty to the other members, the directors of the company will want

to be satisfied that the decisions made at a meeting of members are still relevant and valid, that is, in the best interests of the company.

As a result, consideration should be given as to whether the minutes will be written to capture a narrative of the meeting or resolution of

decisions. There is no one-size-fits-all approach to choosing which style of minutes are appropriate for all organisations, but it is common

for the minutes of public companies to be more in the style of minutes of resolution. Importantly, minutes should not record every aspect

of the discussion in relation to any particular matter, nor any record of which member made which comment on any particular issue. The

minutes of a general meeting should remain relatively short and succinct — they are not a report of the meeting, but still ought to display

enough detail to demonstrate that those at the meeting have sufficiently turned their minds towards the issues at the meeting.

Minutes should always be written in the past tense, as they provide a historic record of events. It is also preferable to use the active voice

rather than the passive voice when recording minutes (for example, ‘The chair declared the meeting open’, rather than ‘The meeting was

declared open by the chair’.)

It is also important to number the pages of the minutes for easy reference. A decision needs to be taken as to whether the page numbers

will be consecutive, which can be useful from an audit perspective, as it ensures there are no duplicated page numbers. A decision also

needs to be taken as to whether the chair will sign and date each page of the minutes, or sign and date the final page of the minutes, and

initial the other pages. Both approaches are acceptable — what is important is that the company can provide comfort that the version of

the minutes entered in the minute book is the correct record that has been signed by the chair.

[Agenda items]

The agenda items to be covered in a general meeting of members should be included in the notice of meeting sent to members — see

Governance Institute’s Guidelines for notices of meeting. Matters which are not included on the agenda cannot be brought without notice

(that is, removal and appointment of directors or auditors). As a courtesy, the chair may allow discussion, but there is no statutory right

and prescriptively it may be prohibited without notice. At least 28 days’ notice of a meeting of members of a listed company must given

to members. Otherwise, 21 days’ notice applies, with exception if members with at least 95 per cent of the votes that may be cast at the

meeting agree beforehand (s249H(21)(b)). An AGM may be held on shorter notice if all the members entitled to attend and vote agree

beforehand. Shorter notice is not permitted at which a resolution will be moved to remove or appoint a director or auditor under ss 249H(3)

and (4). It is not advisable to allow for matters to be tabled without notice.

The agenda items will likely vary depending on the purpose of the meeting. A requisitioned meeting, for example, may have a specific and

limited purpose. Some of the elements of the agenda, such as the minutes of the previous meeting, therefore, may not be included in the

original agenda.

If the general meeting of members is also an AGM, then the company should be cognisant of the specific statutory requirements governing

the holding of an AGM. For example, s 249L of the Act specifies the contents of the notice of meeting for an AGM for companies.

Meetings of members record the passing of a resolution as the collective will of that body and adequately record the process followed in

coming to that decision, whether it be to take or not to take certain action. Resolutions are determined by either a show of hands at the

meeting or by taking a poll — see Governance Institute’s Best practice template: Annual general meeting — chair run sheet for an unlisted

public or proprietary company for a discussion on the way in which resolutions are determined and declared and Effective AGMs for a

discussion of contemporary practice in relation to conducting voting.

Importantly, the chair is responsible for the conduct of the meeting and ensuring that the resolutions are put to the meeting and

appropriately determined, for example, in favour or against. Even though the chair’s declaration is conclusive of the voting results, the

members present may demand a poll (s250L(3)(c).


General business

The agenda may include an item allowing for general business to be raised.

The minutes should record that the chair invited all those present to raise any matters of relevance that have not been dealt with on the

agenda, and any resolutions or noting of discussion that ensued in relation to those items of business should any be raised. As noted

above, matters which are substantive in nature should not be raised without notice in this part of the meeting. Business without notice can

only be raised by consent.

Otherwise the minutes should record that there were no other items of general business raised.

Next meeting

The next meeting of the members of [company name] will be held on [date] at [time] at [address].

Where known, it is good practice for the chair to confirm the date of the subsequent meeting, thereby providing reasonable notice to the

members. The minutes should record the date of the next meeting. This is not always possible for meetings of members.

Closure

There being no further business, the chair declared the meeting closed at [time].

The time at which the meeting concludes should be recorded in the minutes. The minutes record when the meeting commences and

finishes, as details of the timing of the meeting are part of providing an evidentiary source of the events that occurred.


READINGS Reading 1 — Dabski S, Hartin T and Saffron R, 2014, ‘The dynamic company secretary in the post-GFC landscape’, Governance Directions, November issue, pp 602–606.

Reading 2 — Dembkowski S, 2015, ‘Raise the bar’, Governance Directions, October issue, pp 554–555.

Reading 3 — Donaldson R, 2016, ‘Non-executive directors, Governance Directions, June issue, pp 298–301.

Reading 4 — Hayman R, Mihanovic M, Peregrine M, 2006, ‘Corporate minute-taking: a general counsel’s guide’, Keeping good companies*, July issue, pp 326–329.

*In February 2014 Keeping good companies changed its name to Governance Directions


READING 1 Dabski S, Hartin T and Saffron R, 2014, ‘The dynamic company secretary in the post-GFC landscape’, Governance Directions, November issue, pp 602–606.

By Tim Hartin, Group Company Secretary, Westpac Banking Corporation and Suzanna Dabski, Company Secretary, Westpac Subsidiaries and Rachel Saffron, Company Secretary, BT Financial Group

The dynamic company secretary in the post-GFC landscape

Feature article Chartered secretary

• Following the GFC corporate governance matters are more than ever fundamental to safeguarding the long-term sustainability of an organisation’s operating model and business performance.

• The dynamic company secretary must take into account and manage (sometimes competing) priorities to ensure board decisions are both fully informed and aligned with an organisation’s strategic objectives.

• Cutting-edge technologies and strategic thought-leadership can improve productivity and streamline operating processes and procedures.

The impacts of the Global Financial Crisis (‘GFC’) continue to present an interesting challenge for company secretaries to navigate.

In the wake of the GFC, an ever-changing and uncertain corporate governance landscape has evolved, resulting in the continuing rise in prominence of the role of a company secretary and an increasing focus by boards on organisational corporate governance practices.

This article will explore how the current climate presents an opportunity for company secretaries to showcase the value that company secretarial teams can bring to organisations through corporate governance thought leadership and the adoption of innovative approaches to company secretarial practice.

IntroductionFollowing the GFC, there has been increasing scrutiny of corporate governance practices and the effectiveness of boards’ oversight and monitoring of these practices, particularly those relating to:

• emerging international corporate governance regulation

• the development of what is considered, or perceived, to be ‘best-in-breed’ market practices observed or adopted by organisations globally.

In order to meet the demands of boards and expectations of regulators, in-house legal and company secretariat teams are increasingly expected to review and align, where it is considered appropriate, organisational operating models and activities against this emerging ‘best practice’ paradigm. This has been particularly evidenced through the amplified focus of boards on the continual enhancement of organisational governance frameworks, including by:

• further delineation (and where necessary, clarification) of the respective roles and responsibilities of various board committees

• alignment of operating frameworks of board and board committees with global best practice corporate governance, including matters such as the expectation of demonstration and recording of challenge by directors in the minuting of meetings

• recognition and alignment of organisational policies, practices and frameworks with new or emerging regulatory or governance standards and/or international corporate governance guidelines to most effectively mitigate critical organisational risk classes.

Current corporate governance landscapeSince the GFC, we have seen a new corporate governance landscape emerging on a global scale. This landscape is very much continually evolving, and its inherent uncertainty

602

poses a plethora of challenges for organisations to navigate.

Increasingly, pressure is being placed on boards to be on the one hand more challenging of management, and yet on the other hand to continue to act in an oversight capacity, focusing on the strategic direction of an organisation rather than acting as a management function. Managing these competing expectations is made all the more challenging by increased global regulatory expectations on the whole, in an environment where there is an acute awareness of the personal, civil and criminal liability risk that individual company directors and employees may bear. To heighten the complexity of the challenge for organisations, these developments need to also be considered in light of political and media agendas, which are not necessarily aligned, as well as increasing public scrutiny of organisations to ensure that they act appropriately and in a socially responsible manner.

Rise in prominence of corporate governanceMaintaining excellence in corporate governance matters is now, more than ever, a fundamental component of safeguarding the long-term sustainability of an organisation’s operating model and business performance.

It is core to an organisation’s business-as-usual activities to keep fully informed of emerging local (and increasingly) global company law, corporate governance, regulation and compliance developments, and to monitor developments in these areas to be best placed to assess potential implications, and opportunities, for an organisation’s businesses and its internal and external stakeholders. As organisations increasingly operate on a global scale, it is critical for their corporate governance practices to be compatible with the corporate governance standards of the various jurisdictions in which they operate. This is the new ‘business-as-usual’ operating environment for both company secretaries and general counsel.

It is therefore critical to corporate governance excellence, and not just corporate governance processes and

procedures, for company secretaries (and general counsel) to not only be multi-skilled but also dynamic, forward-looking and highly strategic within the performance of their roles.

Distinction between company secretary and general counsel rolesIn the James Hardie decision1, the High Court of Australia found that the role of company secretary and general counsel was indistinguishable when held by one person, stating that:

‘…it is not possible to sever responsibilities into watertight compartments, one marked ‘company secretary’ and the other marked “general counsel”. The expression “company secretary” is not a term of art. The responsibilities of company secretaries can vary from company to company, within companies, and over time. They have tended gradually to wax over many decades.’2

The corollary of this finding is that organisations have and continue to decouple the role of company secretary and general counsel. This separation recognises the distinct, and yet very complementary, nature of these disciplines. It should be noted, however, that varying approaches may be adopted by organisations to most effectively leverage the synergistic capabilities and strong interaction that is required between these roles.

A primary role of a company secretary is to manage the proper functioning of the board so that it can appropriately discharge its duties to all relevant stakeholders. This is an important responsibility and, as a matter of course, requires close interaction between the company secretary and management to ensure that matters are appropriately considered from a corporate governance perspective. In addition, a company secretary is responsible for other ‘core’ governance activities, including preparing board meeting agendas, drafting or reviewing board papers, coordinating, attending and minuting board meetings, lodging documentation in accordance with regulatory requirements and maintaining corporate registers and records. The role of the company secretary is therefore very much a

role of substance that requires the effective co-ordination of many moving organisational pieces.

Accordingly, the company secretary has a prominent, and yet very different, role to play at the board table to that of a general counsel. While a general counsel will, for example, advise on the legal aspects of an issue, the discipline of corporate governance extends into other parts of an organisation. Interestingly, in James Hardie, the Australian Federal Court of Appeal found, and the High Court agreed, that where a company secretary has legal skills, he or she is expected to utilise them and that a company secretary with legal background would be expected to raise issues such as potential misleading statements (for example, in relation to public announcements) or disclosure obligations with the board.

In summary, the company secretary role is no longer, and nor should it be, considered as merely an administrative role within an organisation.

The new face of the company secretaryThe traditional view of a company secretary is very removed from current expectations and the trajectory of this role within the organisational context going forward. The historic view states that:

‘…a secretary is a mere servant. His position is that he has to do what he is told, and no person can assume that he has any authority to represent anything at all, nor can anyone assume that the statements made by him are necessary to be accepted as trustworthy without further inquiry.’3

The modern day company secretary is a far cry from this descriptor — today’s company secretary is expected to be dynamic. This is not to diminish the value of effective and efficient administration; exceptional administrative skills are simply no longer the core aspect by which a company secretary is valued within an organisation — they should now merely be a baseline.

In order to contribute the most value, a company secretary must be

603Governance Directions November 2014

The mix of skills in today’s company secretariat teams needs to be diverse, highly motivated and agile, whilst at the same time run in a sustainable and systematic fashion.


organisationally aware — and in this sense, be acutely cognisant of not just organisational structures but also of key strategic objectives and priorities — as well as have multi-disciplinary skills and capabilities to assess implications, potential threats and opportunities, in order to assist the organisation with the delivery of those core objectives.

How does a company secretary become dynamic? And, as a value proposition, how do we foster and harness this dynamism throughout the broader company secretarial profession? These are pertinent questions not only for individual company secretaries, but for organisations generally.

Company performance is instrumentally driven by an effective board, which in turn is assisted by an effective company secretariat team. As a critical conduit between the board and management, the dynamic company secretary must take into account and manage (sometimes competing) priorities to ensure board decisions are both fully informed and aligned with an organisation’s strategic objectives. As a central repository of information and a key communication channel, the dynamic company secretary has unprecedented ability to influence harmonious synergy between multiple stakeholders within an organisation to drive its strategic objectives. Therefore, today’s dynamic company secretary needs to act as the axis of efficient and effective

communication between the various internal organs of an organisation.

Today’s company secretary is the paradox as they are expected to be both a generalist and an expert all at once. The mix of skills in today’s company secretariat teams needs to be diverse, highly motivated and agile, whilst at the same time run in a sustainable and systematic fashion. The dynamic company secretary that forms part of this team environment should therefore be a professional with general knowledge, but one who is simultaneously sufficiently expert for whatever situation comes to hand. They not only have an excellent foundation of corporate governance expertise and administrative skills, but typically also have a wealth of other expertise and experience, not only in the particular organisational industry they operate in, but including in one or many of the following disciplines — accounting, audit, commerce, economics, risk management, compliance, law or other professional advisory services. In performing their role, they are a trusted adviser, facilitator, communicator, mediator, salesperson, confidant and expert.

Attracting the right type of individual with such diverse capabilities is core to the functional sustainability and performance optimisation of a company secretariat team. Talent recruitment and retention is difficult within any professional discipline, however it becomes an even greater challenge if one is looking to build

a team of individuals who are experienced in the business-as-usual functions of a typical company secretariat team with these added ‘dynamic’ qualities. These qualities only come from recruiting the right people with the right qualifications, skills, experience, and perhaps most crucially, attitude to embrace such a challenging role. In addition, they must be adequately supported to develop; strong leadership and direction in the secretariat means boards are fully supported and can discharge their duties appropriately.

The ongoing challenge will be to continue to develop solid recruitment and retention strategies that align the (sometimes competing) objectives of the many facets of an organisation, to attract and keep this type of talent within a professional discipline that has been historically tarnished with the brush of being ‘merely administrative’. Ultimately, a dynamic company secretary can only truly flourish in an environment which supports and continually develops their talent. What is required is the implementation of a cohesive strategy aimed at developing and harnessing both individual and wider company secretarial knowledge and expertise through:

• tactical up-skilling to continue to meet board and stakeholder needs as well as organisational strategic priorities

• embedding a culture of risk management as part of any company secretariat team’s cultural and operating DNA

604

In an age where the corporate governance landscape remains largely uncertain, it is imperative that the company secretary wholly embraces the opportunity to leverage innovation in corporate governance practice through mediums such as technology.

• developing and utilising innovative technological solutions to further optimise the delivery of a company secretariat team’s core services to its business partners and other stakeholders.

Value creation and innovative approaches to company secretarial practiceAs the role of a company secretariat team centres around effective and efficient information management and communication within an organisation, an opportunity exists for a company secretary (or indeed, as the case may be, the wider company secretariat team) to become dynamic and create value within an organisation by investing time and resources into developing more efficient communication processes and procedures. Investing in such efficiencies enables strengthened and effective partnership with management and other key stakeholders. Moreover, it enables the embedding of best practice corporate governance standards throughout an organisation.

Innovation lies at the heart of effecting efficient information and communication channels. Importantly, however, this innovation rests not in the outcome itself, but rather in the mechanism or pathway that is employed to enable the company secretary to assist with the delivery of organisational strategic priorities.

By employing cutting-edge technologies and strategic thought-leadership to facilitate effective and efficient knowledge-sharing and information capture within an organisation, a company secretary can improve productivity and streamline operating processes and procedures and, in so doing, evidence tangible bottom-line savings. But perhaps more importantly, the company secretary is then empowered to truly add value; by way of their position, they are able to facilitate the achievement of targeted organisational priorities (including both governance and economic outcomes) through the focused shift from activities that are value-inefficient to those that are truly worthwhile.

Harnessing innovative technologies in the boardroom to allow for streamlined processes and procedures is just one example of how company secretaries can add value to an organisation.

Environmental and sustainability consciousness has birthed a movement towards the adoption of electronic paper distribution processes within company secretariat functions. Electronic board paper distribution fosters considerable time and cost efficiencies by allowing for documentation and multi-media to be disseminated (and, where necessary, deleted for information security purposes) from smart-phones and tablet devices. For a function that has historically dealt in paper-product deliverables, this development quite literally revolutionises corporate governance management. It garnishes tangible time and cost savings and sets the tone for a future which can deliver even smarter tangible benefits that support organisational sustainability values whilst concurrently increasing deliverable consistency, promoting agile and flexible working environments and appropriately protecting organisational intellectual property.

In an age where the corporate governance landscape remains largely uncertain, it is imperative that the company secretary wholly embraces the opportunity to leverage innovation in corporate governance practice through media such as technology. However, innovation in an organisation can only come to fruition within a culture of continuous improvement. Vitally, company secretariat teams must foster an effective cultural framework that

supports and promotes the sustained development of innovation: one where the individual, (here being the dynamic company secretary) feels that they can freely challenge the status quo to develop, present and deliver the creative solutions that really make the difference. This culture must flow seamlessly throughout the organisation, not only as ‘tone from the top’ but perhaps more importantly ‘tone from the middle’. The value of a board, for example, espousing certain cultural values will be lost if these are obstructed by inconsistent messages and behaviours within an organisation.

Moreover, it is in the interests of the company secretarial profession to promote the dynamic company secretary and the use of innovative corporate governance practices.

The impact on the integrity and significance of the company secretariat function is inextricably dependant on demonstrably creating value within an organisation. As a profession, company secretaries should collectively and actively look to nourish the dynamic company secretary, to challenge organisational inertia (if it exists), and to revolutionise corporate governance practices for the better through forward-looking innovation and thought-leadership.

The role of the dynamic company secretary becomes multi-faceted, requiring individuals within this role to:

• ensure compliance, advocacy and thought-leadership of best practice corporate governance standards and the sustainability of their roles and profession

605Governance Directions November 2014

• deliver the best possible outcomes to their stakeholders through effective relationships, information management and communication, and innovation

• raise the profile and perceived-value that can be delivered by the company secretarial profession.

ConclusionDevelopments in the global corporate governance landscape following the GFC have necessitated an evolution in the role of the company secretary within organisations.

The company secretary today is much more than merely the chief administrative officer within an organisation. The company secretary is now dynamic, leveraging opportunities to achieve wider organisational objectives through the adoption of innovative company secretarial practices.

The great challenge for organisations and the company secretarial profession is to develop and adequately nurture this emerging situation. It is clear that the company secretary is probably more significant now than at any time in history and that this will continue for some time yet, but only if we embrace and grow a cultural framework that supports the dynamic company secretary and the innovation and

thought-leadership which will then naturally follow.

Tim Hartin can be contacted on (02) 82530390 or by email at [email protected].

This article was first published by the International In-house Counsel Journal, Vol. 7, No. 28, Summer 2014, 1.

Notes1 Shafron v Australian Securities and

Investments Commission [2012] HCA 18.

2 Shafron v Australian Securities and Investments Commission [2012] HCA 18 (paragraph 41).

3 Barnett Hoares & Co v South London Tramways Co (1887) 18 QBD 815 per Lord Esher M.R.

The impact on the integrity and significance of the company secretariat function is inextricably dependant on demonstrably creating value within an organisation.

Governance Institute of Australia’s new booklet, Effective AGMs, provides an invaluable guide to ensure that the essentials are carried out and also shows how to make your company’s engagement with shareholders mutually beneficial.

Governance Institute members and subscribers can request their free copy by calling (02) 9223 5744 or by emailing [email protected]. Non-members and members can purchase additional copies at $25 per copy.

Effective AGMs


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READING 2 Dembkowski S, 2015, ‘Raise the bar’, Governance Directions, October issue, pp 554–555.

By Dr Sabine Dembkowski, Managing Partner, Better Boards Ltd

Raise the bar

As the point of communication between directors and shareholders, company secretaries are able to help improve board effectiveness

There is heightened attention on governance since the financial crisis. Although the basic requirements are set out, the key question the business media and organisations are asking is: ‘How can we reach beyond governance and really bring it to life?’

Company secretaries can go beyond simply ensuring their organisation complies with standard financial and legal practice and maintains standards of corporate governance. In fact, as the point of communication between directors and company shareholders, they are able to help improve board effectiveness. The following seven areas provide an evidence-based approach to improve a board’s effectiveness:

• the composition of the board

• the ability of the board to use the strength of its members

• clarity about roles and responsibilities

• joint vision

• the ability to resolve conflicts between the board and management

• the structure and organisation of the board’s work

• regular reviews and reflection about the board’s work.

Board compositionThis area has received most attention to date, especially with discussions in the media about diversity and quotas for women on boards. Yet diversity is just a small part of the puzzle. Organisations that have the funds tend to hire well-known headhunting firms which are briefed to find executives with a distinguished background, expertise and track record of achievements. More often than not the exercise produces a board full of ‘achievers’ and ‘alphas’. This type of selection provides security and the feeling among all involved that they have done a good job. This is a well-intentioned (but rather expensive) way to form a board and by no means guarantees superior returns. In fact, the chances that such groups really work well together are slim. A well-composed board is not a question of education, experience or past achievements, but of complementary skills, personalities, role behaviours and fit.

As a starting point, company secretaries should establish what know—how areas, role behaviours, strengths and weaknesses are present in the existing board. Second is to ask the chosen headhunter to design an interview and selection process that specifically tests and identifies these criteria. This can be done through the combination of tried and tested interview techniques and validated psychometric tests.

• A board full of ‘achievers’ and ‘alphas’ does not guarantee superior returns.

• Encouraging and designing a process for establishing a common vision is a role for the company secretary.

• The company secretary can encourage the collection of information and documentation of best practice so that boards can learn from their peers.

Trends & special topics

554

Leveraging the strengthsBoard members’ awareness of their own strengths and how they can make best use of them varies enormously. It is also the case that seasoned board members often struggle to identify the strengths of other board members and are less willing to learn than the newer generations of directors. Encouragingly, the latter are very interested in learning about themselves and how they can become more effective.

The company secretary can encourage the identification of personal strengths. Validated instruments and tests, such as the VIA Signature Strengths test or the Gallup Strength Finder, can be useful tools in doing this.

Roles and responsibilitiesRoles and responsibilities are not as clearly defined as one may wish. Some grow over time or are the result of a specific initiative of an individual board member, tailored around their agenda, skills and needs. Boards often have substantial ‘grey areas’ of responsibility. These can be the root cause of daily conflicts and waste, and can destroy resources that could be used to create value for the organisation and its stakeholders.

The company secretary should make sure that roles, responsibilities and tasks of individual board members are defined, and a map of these is created.

A common visionThis sounds simple, but in practice it can prove to be a challenge. Developing a shared vision and gaining the approval and commitment of all stakeholders is a process. The communication of a shared vision is essential: nothing is more damaging to a company than the revelation that there are disagreements on the board about vision, strategy and subsequent action to be taken.

Encouraging and designing a process for establishing a common vision is a role for the company secretary. The most successful companies design a development process for defining and communicating the vision throughout the whole organisation — but it starts at the board.

Resolving conflictsExecutives below the board have often been to first-class universities or business schools and have their own ideas about the company and its direction. This can lead to open conflict. Board members need to convince these executives, with the quality of their argument and personality, to analyse conflicts and solve them. The size of this challenge should not be underestimated. A coalition or alliance between the board and management is crucial for success. The board can serve as a role model for the development of a culture where conflicts are resolved constructively, and the company secretary should aid this by encouraging investment in personal development and conflict resolution skills.

Structure and organisationMany board members report that they felt completely lost when initially joining their board, and had to learn how to operate at that level the hard way, over time. The work of many governing boards is poorly structured and new members have to settle into a system that works for those in the know but is not necessarily logical to those observing or joining it. This is a factor that deserves more attention; much can be done to improve the organisation of a board’s work, often at little cost but with a highly positive effect on the organisation. The company secretary can encourage the collection of information and documentation about what has worked well in the past or what works well in other organisations so that boards can learn from their peers. This will be mirrored at lower organisational levels.

Reviews and reflectionMany practitioners appreciate regular shared time out — where people have the opportunity to connect with each other and reflect on their work. This is considered a crucial component of any best practice process. Scheduling time for this should be made a priority.

This article first appeared in the August issue of Governance + Compliance magazine www.govcompmag.com

A well-composed board is not a question of education, experience or past achievements, but of complementary skills, personalities, role behaviours and fit.

555Governance Directions October 2015


READING 3 Donaldson R, 2016, ‘Non-executive directors, Governance Directions, June issue, pp 298–301.

Legal updates Corporate law

By Ross Donaldson, Special Counsel, Norton Rose Fulbright

Non-executive directors

• The roles of an executive and non-executive director were examined by the Court of Appeal in relation to a director’s entitlement to liability insurance cover.

• The independent role of a non-executive director is fundamentally different from that of an executive director who is involved in day-to-day management of the company.

• In companies with multiple related entities, non-executive directors need to be clear about whom they are serving and why.

What does it mean to be a non-executive director? How do we distinguish between the roles of an executive and non-executive director? As a director, who you think you are or how you are held out to be by the company is not likely to be determinative. How will this impact on a director’s liability and their entitlement to liability insurance cover? A recent decision considers these issues.

In December 2014 the Victorian Court of Appeal ruled on the construction of a liability insurance policy taken out for the benefit of directors and had cause to consider the meaning of the term ‘non-executive director’ in that policy. The decision provides guidance as to the different roles and responsibilities executive and non-executive directors assume in the management of a company and their duties to that company.

BackgroundAIG Australia Ltd v Jaques [2014] VSCA 33 (Jaques) was an appeal from a decision of a single judge of the Supreme Court of Victoria.

AIG issued an investment management insurance policy to the company Australian Property Custodian Holdings

Ltd (Holdings) (the policy). The policy undertook to repay or reimburse an insured person for any claim made during the policy period for a wrongful management act. The policy operated from 16 July 2010 to 16 July 2011. An insured person was generally a director or non-executive director of Holdings. Under the policy, executive directors were insured for losses of up to $5 million. Non-executive directors were entitled to extended cover by way of a special excess limited to an additional $1 million.

Jaques sought indemnity pursuant to the special excess limit to defend a claim brought against him as a director of Holdings, and in respect of alleged wrongful managerial acts that occurred on various dates in 2006, 2007 and 2008.

A ‘director’ was defined in the policy as any person who was, now is or during the policy period becomes an executive or non-executive director of Holdings. A ‘non-executive director’ was defined as any natural person who serves as a non-executive director of Holdings at the time of any wrongful managerial act. There was no other explanation or definition in the policy to assist in determining the difference between a director and a non-executive director for the purpose of this cover, and it was accepted by the parties that the Corporations Act 2001 (Cth) offered no useful definition or criteria that would assist.

AIG sought to argue that Jaques was at the relevant times an executive director of Holdings, whereas Jaques said he was a non-executive director.

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Issues to be determinedThe decision was primarily concerned with seeking to define the role of a non-executive director in modern corporate life and applying that definition to the facts of Jaques’ involvement in Holdings and its related entities. For this reason it provides useful guidance in this ever evolving area of directors’ responsibilities.

In determining the issue at first instance, the court was required to analyse Jaques’ role over a period of time when he held various roles as a director of Holdings and as an employee of another entity. Jaques’ involvement with Holdings and related entities was complex. The court at first instance and on appeal was required to examine Jaques’ roles and seek to characterise them as those of either an executive director or a non-executive director of Holdings.

AIG conceded at the trial that Jaques was a non-executive director prior to 6 April 2004 and Jaques conceded that he was an executive director from 26 June 2007, but AIG did not accept that Jaques was acting as a non-executive director from 6 April 2004 up to 26 June 2007, which would entitle him to the special excess cover for claims in regard to wrongful managerial acts during this period.

Jaques’ involvement with Holdings, its related entities and its various personalities was far from simple. Prime Trust owned retirement villages. Holdings undertook the office of trustee of Prime Trust. Other entities managed the businesses operated on the Prime Trust properties. Jaques accepted an

invitation to become a non-executive director of Holdings in March 2001. In late 2003 Holdings negotiated to purchase a retirement village in Buderim Gardens. A management company was formed to manage the village. Jaques was asked to assist in managing the village and was employed as a general manager of Australian Property Custodians Pty Ltd (Custodians). He ceased to receive a fee from Holdings and became a salaried employee of Custodians.

On 5 July 2004 Holdings issued a supplementary product disclosure statement which included a statement that Jaques was a director of Holdings. As an employee of Custodians, Jaques also performed work for Australian Property Syndications Pty Ltd (Syndications), which was related to Prime Trust. On 26 June 2007 the board of Holdings resolved that deeds of appointment be approved and executed to appoint Jaques as an executive director.

Jaques’ work and functions during the relevant period were multifaceted and hence the difficulties in characterising whether he had discharged functions as an executive or non-executive director of Holdings. For example, Jaques’ role included identifying and assisting in the acquisition of property, which would be to the benefit of Holdings but which he did as an employee of Custodians. It was a task for which his skills and experience were well suited. In some Holdings publications, Jaques was described as an executive director. The judgment examines Jaques’ role and duties in some detail.

Characterising the role of a non-executive director Previous legal authorities have suggested that the role of a non-executive director is to be independent of corporate management. Non-executive directors are not bound to give continuous attention to the affairs of the corporation. Their duties are intermittent in nature and intended to give an independent review of the actions of management. Another, similar characterisation is that the role of a non-executive director is to guide and monitor the company, rather than to be involved at an operational level. In Jaques the court generally agreed with these characterisations.

Further, the court suggested that it was reasonable to presume that an appointment of a director is in a non-executive capacity, unless they are given executive powers or some other executive authority, for example, by way of an employment contract, services agreement or express delegation, in which case their role may be characterised as that of an executive director.

Finding of Court of AppealThe Court of Appeal upheld the primary judge’s finding that Jaques acted as a non-executive director of Holdings and was entitled to cover under the special excess limit extension of the policy. The appeal was dismissed.

The fact that Jaques was on an employment contract with Custodians and not with Holdings was an important fact that assisted the court in characterising his role with Holdings; as was the fact that Jaques’ duties were allocated by the board of Custodians, not Holdings, and that he managed the retirement villages on behalf of another entity. None of his conduct was sufficient to support a finding that he was acting as an executive of Holdings, but nevertheless detailed factual findings needed to be made before arriving at this decision.

Relevantly, the court agreed that generally a non-executive director will be one who is not a full-time operative

The court stated that how a director is held out to the public… is not determinative of whether they are acting as an executive or non-executive director.

299Governance Directions June 2016

Legal updates Corporate law

of the company, and who is not otherwise employed by it or appointed by it as its delegate to act in its affairs. Whether that non-executive director is part time or full time is also unlikely to be determinative.

The role of the non-executive director is generally considered to be that of an independent participant in the workings of the board and overseer of the company, but without having operational or administrative control, which is generally left to the executive directors.

In minutes of meetings and in a product disclosure statement issued by Holdings for a prescribed managed investment scheme in 2005, Jaques was described simply as a director. The court stated that how a director is held out to the public, including the investing public, for example, in company publications, media or corporate lodgings, is not determinative of whether they are acting as an executive or non-executive director.

While it was recognised that a director may be appointed for reasons other than their management skills or knowledge of the industry — for example, for reasons such as the perceived commercial advantage to attract business and to add to the prestige or status of a company — that motivation will also not be determinative of the legal role they are fulfilling.

Further, the subjective views of the board or its individual directors as to their roles are also unlikely to be

determinative. Each director will owe a duty to exercise independent judgment and supervision as a board member. There is no difference of duty owed between the roles of executive and non-executive director. However, the standard of care owed may vary between executive and non-executive directors. The actual duties performed by the director are determinative of the issue. The independent role of a non-executive director is fundamentally different from that of an executive director who is involved in the day-to-day management of the company.

For a non-executive director to take on special roles or tasks within the company will not necessarily alter their non-executive status. What may alter their non-executive status will be whether they can and do exercise any power and function in the management of the company.

Importantly, the fact that a non-executive director may fail to exercise independent assessment and supervision of the business of the company will not necessarily be a reason to characterise their role as that of an executive. Rather it is a reason to be critical of their conduct generally and the standard of their care for the company. By such conduct they may have breached their duties as a non-executive director to act independently and to apply an independent mind to the business of the company.

Enhanced insurance cover to non-executive directorsIn Jaques, the judge at first instance observed that the satisfactory performance of the role of a non-executive director was as much to the benefit of the directors’ liability insurer as it was to the company. By not being engaged in the management of the company, a non-executive director should bring an independent mind to the performance of the tasks of a director. Additional insurance cover offered as in Jaques to non-executive directors would operate to attract suitable candidates and therefore would be beneficial to both the company and the insurer because it should reduce the likelihood of company errors and therefore insurance claims.

Lessons for directors and insurersCompany directors need to reflect on the role and duties they discharge. In complex modern businesses their role may not be as simple or clear-cut as it was in earlier decades. Further, their roles may change during their appointment. In complex business structures, there is potential for misunderstanding about their role.

The courts recognise the different purposes for which a non-executive director may be required in the governance of a company. Perhaps they are required as an independent overseer, perhaps as a figurehead,

Where a non-executive director takes on executive or management functions, is given managerial powers or descends to the operational level of the company, the cloak of ‘non-executive’ may be lost.

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a statement of reliability and prudence, or perhaps as a facilitator of business and connections. They may be asked to take on special roles or duties within the company. In Jaques, the Court of Appeal considered that none of these varied roles was incompatible with the duties of a non-executive director. Yet in each of those roles the non-executive director owes the same duties to exercise independent and reasonable judgment as a board member.

Where a non-executive director takes on executive or management functions, is given managerial powers or descends to the operational level of the company, the cloak of ‘non-executive’ may be lost. In such circumstances their conduct will be judged differently, and will be assessed to a different standard. In circumstances where Jaques’ role in working with Holdings and related entities was multifaceted, AIG may have been better served to avoid coverage uncertainty by seeking to clearly define what it considered to

be the roles of executive and non-executive directors in the policy from the outset, given the additional benefit it offered to non-executive directors. As the Court of Appeal observed, there was no useful definition in the policy and the Corporations Act did not assist. The parties were left to characterise Jaques’ conduct by a careful examination of the complex history of the company and by relying on previous decisions of the courts.

While the substance of a director’s conduct will always be determinative, those directors seeking to preserve their non-executive status should consider a few precautions. Directors who believe themselves to be non-executive should ensure that they are correctly described as non-executive in company publications, minutes of meetings, company resolutions, documents for lodgment at ASIC and media releases. They should consider the additional roles they may take on within the company.

Simply acting as a board member and meeting at regular intervals will be uncontroversial. But when special tasks or roles are delegated to them, closer consideration is required. They should avoid being delegated executive powers or responsibilities. Employment and consultancy agreements within a corporate group should also be clear about roles and the entities to which they relate. In companies with multiple related entities, corporate or otherwise, non-executive directors need to be clear about whom they are serving and why.

Ross Donaldson can be contacted on (03) 8686 6836 or by email at [email protected].

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Find out more about membership at governanceinstitute.com.au/Membership

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301Governance Directions June 2016


READING 4 Hayman R, Mihanovic M, Peregrine M, 2006, ‘Corporate minute-taking: a general counsel’s guide’, Keeping good companies*, July issue, pp 326–329.

J U L Y 2 0 0 6 K E E P I N G G O O D C O M P A N I E S326

The post-Sarbanes-Oxley environment calls

upon governing boards to place renewed

emphasis on the proper role of corporate minutes

as a record of organisational and board conduct.

Indeed, the Disney shareholder derivative

litigation is one of a series of United States cases in

which the state of corporate minutes played an

important role in the court’s decision.

While experts may disagree on the most

appropriate style for minutes (for example,

‘comprehensive’ versus ‘minimalist’), there is

virtually no disagreement on the importance

attributed to an effective minute-taking process. It

is becoming increasingly clear that properly

prepared corporate minutes can provide the

organisation and its board members with

meaningful protection against certain liabilities,

while inadequate minutes increase legal exposure.

Given the regulatory pressures of corporate

responsibility, traditional approaches to minute-

taking may no longer be sufficient to serve the

interests of the organisation and the board.

Specifically, this renewed emphasis is likely to

require a substantially increased role for both the

general counsel in the minute-taking process and

individual board members in the review and

approval of draft minutes.

The goal of this discussion is to guide

corporate secretaries and general counsel as they

advise executive leadership and the board on an

updated, effective minute-taking process.

The role of minutes

How minutes can help

The fundamental role of corporate minutes is topreserve an accurate and official record of theproceedings of a board or committee meeting.Well-kept corporate minutes serve as a record ofcorporate decisions, reflect director dissent whereappropriate, offer guidance for future boardaction, serve as a valuable source ofcontemporaneous evidence in regulatory orjudicial proceedings and reduce misunderstandingas to the intent of the board. Corporate minutescan document compliance by board andcommittee members with their fiduciaryobligations. Furthermore, the maintenance ofaccurate, thorough corporate minutes is consistentwith the Sarbanes-Oxley emphasis on greateraccountability and disclosure.

How minutes can hurt

Poorly kept corporate minutes deny the board apotentially dispositive resource from which todefend their conduct or to explain the full natureof a board decision. In addition, regulators andother plaintiffs will seek access to corporateminutes to bolster their arguments, and courtsthemselves will give substantial credence to thecontents of minutes. Recent developments offerpainful examples of the cost attributed topotential consequences of incomplete orinsufficiently prepared minutes.

For example, the perceived limitations of the

Disney Compensation Committee minutes (for

example, brevity, inconsistency with the

subsequent recollection of Disney officers) played a

major role in the ability of the plaintiffs to

withstand a motion to dismiss and to proceed to

trial. In addition, in the New York attorney-

general’s challenge to the compensation of the

former New York Stock Exchange Inc’s chief

executive officer (CEO), a close review of board and

compensation committee minutes served as a

C O M PA N Y S E C R E TA R Y

Corporate minute-taking: a general counsel’s guide

Key Issues

• Traditional approaches to minute-takingmay no longer be sufficient to serve theorganisation and its board

• How to re-evaluate your minute-takingprocess

• Practical suggestions for effectiveminute-taking

By Russell Hayman, Mark J.Mihanovic, Michael W. Peregrine,McDermott, Will & Emery

327

primary basis for the breach of fiduciary duty

allegations. Similarly, much of the bankruptcy

examiner’s criticism of the WorldCom board of

directors and its inattentiveness concerning corporate

affairs was based upon its review of corporate minutes

and similar records. In these and other high-profile

cases, corporate minutes have provided damaging

evidence of (or created unfavourable inferences

concerning) breach of fiduciary duty and/or created

confusion or misunderstanding concerning the

intentions of the board.

Suggested approach

In re-evaluating the sufficiency of its minute-taking

process, the corporation’s board and its general

counsel may wish to consider the following

approach.

Remember the purpose

Well-prepared corporate minutes record principal

actions taken at board and committee meetings.

When well prepared, minutes can achieve the

collateral purposes of reducing the board’s liability

profile and assisting director recruitment and

retention efforts.

Length

While the fundamental purposes of minute-taking

can be achieved by a ‘minimalist’ approach, greater

benefits are likely to be achieved by means of detail

and elaboration. This does not mean minutes

should be a ‘virtual transcript,’ but rather an

elongated approach is more likely to establish the

prudence and clarity of the decision-making process.

After all, the very meaning of ‘minutes’ infers a

document that is a summarised record of actual

events. A willingness to be expansive allows the

scrivener to better reflect both the ‘flow’ and ‘spirit’

of the meeting, spending more time describing the

discussion of more significant agenda items.

Reflecting business judgment

Demonstrate compliance with fiduciary obligations

within the minutes by incorporating:

• the substance and tenor of the deliberations

• an identification of the general amount of time

spent on a particular issue in order to reflect the

related level of attention provided by the board

• a recitation of the material presented to the

board for its review, and

• confirmation (where accurate) the board

received the material in advance of the meeting.

Especially given the Disney court’s focus on

conduct of individual directors, each of these are

matters in which each director will have an interest

in establishing an adequate record.

Basic features

Regardless of the subject matter discussed at a

meeting, certain fundamental matters should always

be reflected in the minutes:

• the meeting date, time, duration and location

• the nature (regular or special) of the meeting

• a list of participants, separating officers and

directors from invited staff, advisers and guests

and those absent

• presence (or lack of presence) of a quorum

K e y I s s u e s C O M PA N Y S E C R E TA R Y

Practical suggestion

Schedule a special educational session at an

upcoming meeting to brief the board on the

renewed importance of the minute-taking

process and specific changes in board practices

that may be required in response.


Avoid artificial, mandated limitations on the

length of minutes, adopted primarily to

facilitate ‘easy’ director review. The length of

the minutes should bear a direct relationship to

the importance of the meeting agenda.


• Record the starting and concluding time of

the meeting and the time spent by the

board on each substantive item on the

agenda to better emphasize the pro-

portionate attention spent on material items.

• Don’t attempt to reflect all of the

questions raised by board members in

the context of a meeting but rather

emphasize broadly the involvement and

‘constructive scepticism’ of board

members (for example, ‘a discussion [of

10 minutes] followed the chief financial

officer’s presentation’).

• Note for the record where material that

is the subject of discussion was

distributed to the board in advance of

the meeting and by what time.

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C O M PA N Y S E C R E TA R Y c o n t i n u e dKey Issues

• the names of all individuals making specific

presentations

• a list of all material distributed at the meeting

• the general items of discussion, which may be

satisfied by attaching a copy of the agenda and

noting any deviation from it, and

• confirmation of all action taken, including

adoption of resolutions.

Specific decisions

Minutes should reflect the specific decisions

taken at the meeting, whether they involved a

decision to take action or not to take action. If

necessary for compliance or fiduciary duty

purposes, the minutes should reflect those

specific factors that were material to the board’s

decision. In this regard, it may often be useful to

record the board’s consideration of advantages

and disadvantages of, and alternatives to, a

specific proposal.

Recording conflicts, dissents andabstentions

Minutes should reflect those directors who

refrain from voting or participating in the

discussion due to identified conflicts of interest,

as it is vitally important to establish the

disinterested nature of any board action. In

addition, the current liability environment

suggests accommodating the interests of

individual directors who wish their dissenting

vote or abstention be reflected for the record.

Lawyer–client privilege

Those portions of board meetings devoted to

discussion of lawyer–client privileged matters

should be noted as such in the minutes without

further elaboration, other than confirmation that

the privileged discussion was conducted in the

presence of counsel. If more elaborate minutes of

privileged discussions are needed, they should be

memorialised in separate minutes marked

‘Confidential — Lawyer–client privileged,’ and

kept apart from other minutes in a secure and

confidential location.


• Be careful to explicitly reference (in

the text or by footnote) the title of

written and audio/visual (such as

PowerPoint) presentations made

during the meeting, particularly as

they may relate to a decision upon

which the board is expected to

render.

• Regardless of whether they are

actually in attendance at the

meeting, the minutes should reflect

the names of all professionals and

consultants who provided advice to

the corporation on a matter

presented to the board for

consideration, including the nature

and form of that advice.


In relating specific decisions, be sure

to acknowledge debate, for example,

‘The chief financial officer identified

the various assumptions on which her

projections were based, and a

discussion followed’.


An example of identifying disinterest or

dissent is ‘Director X was excused from

participating in both the discussion of, and

vote on, the matter. Directors Y and Z voted

against the motion’.


In referencing lawyer–client privilege,

specific language should be used; for

instance ‘Legal counsel for the corporation,

John Doe, Esq., provided legal advice to the

board concerning the proposal followed by a

discussion between the board and counsel.

Counsel informed the board that this portion

of the meeting was subject to the

lawyer–client privilege’ or, alternatively, ‘A

privileged discussion between the board and

legal counsel for the corporation, John Doe,

Esq., then occurred and for which separate

privileged minutes were taken’.

329

Key committees

Particular attention to accurate minute-taking

should be made for proceedings of committees with

specific regulatory importance, such as audit,

compliance and executive compensation. Minutes

provide an opportunity to confirm, where

appropriate, the consistency of committee action

with ‘best practices’ and satisfaction of regulatory

‘safe harbours’ (such as the compensation

committee and the ‘rebuttable presumption of

reasonableness’).

Executive session

Increasingly popular as a ‘best practice’, it may be

unnecessary to take detailed minutes of executive

sessions as long as some written record is kept

confirming the session was held, its participants and

the date, time, location and duration of the

meeting.

Secretary and directors’ notes

Ideally, the minutes should be the only record of

the board or committee meeting. While directors

may wish to take notes regarding the meeting to

which they can refer when subsequently reviewing

the draft minutes, there are liability risks associated

with such practice. Rather, the director may

prudently choose to rely on minutes taken by a

neutral, trained party, which are more likely to

represent an accurate and complete record of

meeting activity.

The review process

The board must make a bona fide effort to promptly

review and approve draft minutes. This is likely to

require a change in practice by many directors.

Excessive editing by management should be

discouraged to avoid any suggestion of a lack of

integrity in the minutes.

The role of the scrivener

Minute-taking has evolved from a ministerial practiceto more of an ‘art form’. Given the significanceattributed to minutes by all of the participants in thegovernance process, it is important the process isoverseen by an individual with strong familiarity withapplicable governance practices and legal principles.This person must have the expertise to recognisenuances of the discussion, the credibility to suspend aparticular discussion to ask for clarification and theauthority to assure the accuracy of the final minutesand their consistency with related corporate disclosures.This suggests a much more active role for the corporatesecretary in the minute-taking process.

In the post-Sarbanes environment, a thorough,accurate corporate minute-taking process providessubstantial benefits to the corporation and itsgoverning board. Corporate minutes cannotcompensate for improper, inattentive or deficient boardbehaviour; therefore, a close review and refinement ofexisting board processes is highly recommended.

This article is reprinted with permission from the law

firm of McDermott Will & Emery (www.mwe.com). �

K e y I s s u e s C O M PA N Y S E C R E TA R Y


• Committee charters should specify that

meeting minutes are to be taken.

• A process should be adopted for

distribution of minutes outside of the

committee upon request.


The general counsel or, if not invited, the

board chair/lead independent director may

choose to take notes of discussion topics, an

oral summary (or portions) of which may

subsequently be shared with the chief

executive officer.


• Directors need not retain any meeting

notes after reviewing and approving the

formal minutes of that meeting.

• Avoid tape recording meetings as a means

of facilitating the drafting of minutes.


The CEO should join with the general counsel

in explaining to the board the benefits to the

corporation and to the individual directors of

ascribing greater attention to the review and

approval of draft minutes.


POWERPOINT PRESENTATION

1

© Governance Institute of Australia Ltd


This course can be counted as a module towards one of the Governance Institute’s Certificates




Written and designed by:

• Professor Michael Adams FGIA, Head of School of Law, University of Western Sydney

• David White FGIA, Principal, Zenticity Pty Ltd

Revised by:

• Bill Hundy FGIA, Corporate Lawyer and Company Director, Chair governance course review panel

• Allan Luu, Corporate Counsel


1.2 What is the aim of the course?

The aim of this course is to provide an overview of the

role and duties of a newly-appointed company secretary

The objectives are to:

• examine the core duties of a company secretary

• explore the range of legal responsibilities and duties of a company secretary

• provide helpful tips and useful resources

2


2 Appointment and duties ofthe company secretary

• A public company must: − have at least one company secretary, one of which must

ordinarily reside in Australia (s 204A of the Corporations Act)

− must be an individual who is at least 18 years old (s 204B(1))

• Individuals who have been disqualified from managing a corporation must:− be granted permission to be secretary from ASIC or the court

(s 204B(2))

− provide signed consent to act (s 204C)

− be appointed by the directors (s 204D)


2 Appointment and duties of the company secretary (cont)

• The role was originally viewed as a ‘mere servant’

• However, it is now viewed as the ‘chief administrative officer’

• The role may differ, depending on the type of company: ‒ small proprietary company

‒ large proprietary company

‒ public company

‒ public listed company

‒ mutual (limited by guarantee)

‒ other type of organisation


2.1 What are the core duties of a company secretary?

• Corporate constitution

• Statutory compliance

• Registers and registered office

• Company seal and company name

• Board meetings

• General meetings

• Statutory returns

3


2.2 Discretionary duties of the company secretary

• Depending upon the company secretary’s ‘capacity’, discretionary duties may include:

– signing documents and notices

– bank account signatory

– power of attorney

– business names

– executive/employee share plans

– subsidiaries

– intellectual property

– safe custody of documents

– public statements


2.2 Discretionary duties of the companysecretary (cont)

• Depending upon the company secretary’s ‘capacity’, discretionary duties may also include:

– trade practices

– environmental issues

– workplace health and safety issues

– personal property securities register administration

– superannuation

– insurance

– taxation and stamp duties

– dividend reinvestment plans

– accounting

– personal property securities register (PPSR)

– legal advice


2.3 Can a company secretary be held personally liable? (cont)

• Under s 188:– registered office

– notification of officers’ details (changes)

– notifications re shares

– changes to members’ register or holding company

– responding to extract/return of particulars

– lodging annual reports to ASIC

• Other areas of concern are:– registers

– corporate records

– corporate accounts and disclosures

4


2.4 Appointment and reporting lines of the company secretary

• Important to ensure independence of company secretary in the:

− appointment process

− reporting lines

• The board expects the company secretary to:− provide impartial advice

− act in the best interests of the company

• The board must ensure that the integrity of the company secretarial role is maintained by:

− establishing and maintaining clear and transparent reporting lines

− ensuring that the reporting lines are formally documented



• Definitional issues — who is liable?

• Who is an ‘officer’?– s 9:

‘a director or secretary of the corporation…’

or

– a person who participates in making decisions that affect the whole or a substantial part of the business or the corporation’s financial standing, or who has the capacity to affect significantly the corporation’s financial standing

or

– de facto and shadow officers


2.5 What are the key officers’ duties? (cont)

• Officers of the corporation include:– receivers and/or managers

– administrators

– administrators of a deed of company arrangement executed by the corporation

– liquidators

– trustees or other persons administering a compromise or arrangement

5



• Complex area of law

• The duties are all interrelated:– common law duties

– equitable fiduciary duties

– statutory duties

‘…must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they…occupied the office held...’ s 180(1)

Perhaps all these duties look like this…



Adams’ overview diagram

Statutory dutiess184 Good faith – use of

position/use of information

s588G Insolvent trading

s1043A Insider trading

s185

(s180 – 184)

Common law duties Equitable fiduciary duties

s182

s183

Use of position

Use of information

s180

s588G

s181

Care and diligence

Insolvent trading

Good faith



• Statutory duties in the Corporations Act– duty of care and diligence — s 180 (civil only)

– duty of honesty and good faith— ss 181, 182, 183 (civil), s 184(1) (criminal)

– prevent insolvent trading (directors only) — s 588G (civil and criminal)

– insider trading — s 1043A (civil and criminal)

– s 185: ss 180-184 have affect in addition to and not in derogation of any rule of law relating to the duty or liability of...their office

6



• Business judgment rule — s 180(2)(limited defence for negligence actions)

• Statutory derivative action — ss 236, 237

(take action in name of the company)

• Clarify indemnity and insurance — ss 199A, 199B

(company may not give blanket indemnity against loss caused by breach of duty, nor may company pay for insurance covering wilful breach or improper conduct)

• Due diligence defence — s 674(2B)

(continuous disclosure obligations)


• The dual role of company secretary and general counsels has a high degree of responsibility that extends statutory responsibilities to including:(a) a positive obligation to protect the company from legal

risk

(b) critically analysing external advice given to the board and raising any concerns that the review identifies

• The two roles are inseparable and it’s not possible for them to be one role but not the other at any point in time



2.5 What are the key officers’ duties? CASES (cont)

• James Hardie cases– Directors

– Company Secretaries and General Counsels

– Other “officers”

• ASIC v Adler

• ASIC v Vizard

• Vines v ASIC

7


2.6 What company registers must be kept?

• Chapter 2C of the Corporations Act states that you need three registers:

– register of members

– register of option holders (if company issues options)

– register of debenture holders (if company issues debentures)

• Section 672DA: register of beneficial ownership (listed companies only)

• Section 172: location of registers

• Section 177: use of the registers’ information

• Personal Property Securities Act 2009


2.7 What corporate records are important?

• A company, registered scheme or disclosing entity must keep written financial records: s 286

• What corporate financial records are necessary?– depends upon the type of company

– are you a disclosing entity?


2.8 What corporate accounts and disclosures are necessary?

• Depends on how the organisation is classified

• Small proprietary companies do not have to produce financial reports unless:

– members holding 5% of the votes request that they do so

– ASIC gives a direction to do so

• Large proprietary companies and public companies

• Key provisions in Part 2M.3

• Disclosing entities

8


3.1 What does corporate governance mean?

• Different definitions of corporate governance– ASX Corporate Governance Council:

The framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations

• Good corporate governance is the first step to creating a robust corporate culture

• Company secretary well positioned to be able to assist companies to balance the various interests of competing stakeholders


3.2 What is the corporate constitution?

• A contract that defines the relationship between the company, its members and the directors and the company secretary.

• Section 134 of the Corporations Act states that the internal management of the company shall be governed by either:

– Corporations Act 2001 (replaceable rules s 141)

– Corporate constitution

– Combination of both replaceable rules and corporate constitution


3.3 Can company members change board or management decisions?

Organ Theory Diagram

9


3.4 Who regulates companies?

• ASIC:– Oversees company and financial services law

– Primary objective is to protect consumers, investors and creditors

– Allocated funds from the Federal Budget

– In 2009/10 following the global financial crisis, ASIC Act determined compensation for investors who had lost funds in failed investment schemes

– See <www.asic.gov.au>

• APRA: authorised deposit-taking institutions (ADIs)– See <www.apra.gov.au>


3.4 Who regulates companies? (cont)

• Do officers go to gaol? Yes

• During the 2014 -15 financial year, ASIC:– Completed 42 criminal proceedings and convicted 6

people for breaching the Corporations Act

– Commenced and completed 86 investigations (includes insider trading or market manipulation)

– Disqualified or removed 31 people from directing companies

(source: ASIC Annual Report 2014-2015)


3.5 The role of ASX

• The ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd edn 2007, with 2014 amendments) contains:

– eight corporate governance principles

– compliance on the basis of ‘if not why not’

– does not require a ‘one size fits all’ approach

– instead, states aspirations for good practice

10


3.6 Whistleblower protection

• Part 9.4AAA Corporations Act (from 2004):– Encourages the reporting of suspected breaches of the

corporations legislation

– Protects officers, employees, suppliers and their employees

– Disclosure may be made to ASIC, company’s auditor, company officer or senior manager or person authorised by the company to receive protected disclosure


3.6 Whistleblower protection (cont)

• What are the consequences?– Legal protection (s 1317AB)

– Protection from victimisation (s 1317AC)

– The right to compensation (s 1317AD)

– Confidentiality (s 1317 AE):

o ASIC

o APRA

o A member of the Australian Federal Police

o Another person, with the consent of the discloser


4 Directors’ meetings

• Do companies have to have directors’ meetings?

• How do I convene the board meeting?

– notice (s 248C), quorum (s 248F) and agendas

• What happens at a board meeting?

– Majority or consensus

– Decisions that direct, oversee management or delegate

– Monitor the company, management

• What needs to occur after the board meeting?

– chapter 2G Pt1 ss 248A-248G

11



• What information do directors need to support their decision-making?

• How should board papers be prepared and presented?

• The minimum information required should satisfy the duties of directors:

– To act with care and diligence and to be informed to the extent they reasonably believe to be appropriate (s 180)

– To act in the best interests of the corporation and for proper purpose (s 181)

– To ensure that the company remains solvent (s 588G)



• Directors decisions are passed by a majority of directors entitled to vote s 248G (Replaceable Rule)

• This can be varied by the corporate constitution

• Voting at board meetings is usually less formal than general meetings

• Generally, boards usually decide matters by way of consensus despite the majority requirement of the constitution


5 Members’ meetings

• Do companies need to hold members’ meetings?

• How do I convene a general meeting?– notice (S 249H - HA) and agendas

• What happens at a general meeting?– ordinary and special resolutions

– show of hands or poll voting

• What needs to occur after the general meeting?

12


6 Conclusion

• Corporate governance is a complex and evolving area of regulation, law and business

• The company secretary has legal obligations –ignorance is not a defence

• Reflect upon your role in the organisation

• Are you fully equipped to take on the role of company secretary?

• Check your D&O insurance policy

• Chat to your CEO/chair


7 Resources

• Legislation and regulators

• Standards and guidelines

• Governance Institute resources

• Reference books

• Reports and journal articles

• Other resources


Other Governance Institute courses

• For further related content, see the following Governance Institute courses:

– Governance Essentials

– Duties of Officers and Directors

– Operation AGM®

– Legal Framework of Governance

– Financial Analysis for Officers and Directors

– Meetings, Minutes and Resolutions

13


In-house training?

• In-house training– Customised to your organisation’s specific needs

– Meet with your board, executives and staff

– Choice of half and full day courses

– Held at your premises

– You choose the time

– Cost effective


Thank you for attendingAccidental Company Secretary®