Appointment of Directors

Even though shareholders own a company, it is the directors who make the important day-to-day decisions for the company. So how are they usually appointed?

The first step is to read the company’s constitution as it will set out one or more ways to do this. Next, check any Shareholders’ Agreement for other ways the shareholders have agreed on.

Here are some examples.

How to appoint directors:

1. Simple majority vote:
   A simple majority of the shareholders may vote to appoint the directors.
2. Board appointed director:
   Existing directors may appoint another person as director to fill a ‘casual vacancy’ or as an ‘independent director’.
3. Proportional shareholder appointments:
   A shareholder or a group of shareholders who hold a certain percentage of the shares in the company may appoint a director.
4. Shareholder appointment:
   A shareholder may be authorised to appoint a director with delegated powers
5. Appointment by third party:
   The members of a holding company, employees, or a significant debt provider, may have the right to appoint a director.

Qualifications required as a director:

• The Corporations Act requires a director to be at least 18 and to not be an un-discharged bankrupt.
• The company constitution could set out specific requirements to be a director.
• Often there is no share qualification required.

Benefit of shareholders being represented on the board:

• Have an opportunity to influence the direction of shareholders’ investment;
• Take an active part in debate at the board meeting;
• Obtain access to information that is not otherwise available to shareholders;
• Note, directors owe their primary duties to the company, and must act in the best interest of the shareholders as a whole.

 

Legal help for your corporate needs

 

Bell Legal Group can assist you with any corporation issues. For information and assistance, please feel free to contact us on 07 5597 3366 or by email RFfrench@belllegal.com.au or ZBrereton@belllegal.com.au or complete the ‘Contact Us’ form below.

 

Please note that this article was prepared by Bell Legal Group, for information purposes only. It is not legal advice and should not be relied upon as such.