Commonwealth: Corporate Law Economic Reform Program Act 1999 (Cth)

Corporate Law Economic Reform Program Act 1999 Act No. 156 of 1999 as amended This compilation was prepared on 22 May 2003 [This Act was amended by Act No. 146 of 1999 (as amended by Act No. 63 of 2002)] Amendments from Act No. 146 of 1999 (as amended by Act No. 63 of 2002) [Schedule 1 (item 339) amended Schedule 5 (item 11) Schedule 2 (item 22) of Act No. 63 of 2002 further amended Schedule 1 (item 339) The amendments commenced on 5 December 1999] Prepared by the Office of Legislative Drafting, Attorney‑General's Department, Canberra Contents 1 Short title................................... 2 Commencement............................... 3 Schedule(s).................................. Schedule 1—Main amendments of the Corporations Law Schedule 2—Main amendments of the Australian Securities and Investments Commission Act 1989 Schedule 3—Consequential amendments of the Corporations Law Part 1—Amendments relating to new Chapter 6D (Fundraising) Part 2—Amendments relating to new Chapter 2L (Debentures) Part 3—Amendments relating to new Chapter 2D (Officers) Part 4—Amendments relating to new Chapter 2E (Related Parties) Part 5—Amendments relating to new Part 2F.1 (Oppressive conduct of affairs) Part 6—Amendments relating to new Part 2F.1A (Proceedings on behalf of a company by members and others) Part 7—Amendments relating to new Part 9.4B (Civil penalty provisions) Part 8—Amendments relating to new Part 12 of the ASIC Act (Accounting standards) Part 9—Amendments relating to new Chapters 6 to 6C (Takeovers) Schedule 4—Consequential amendments of Australian Securities and Investments Commission Act 1989 Part 1—Amendments relating to new Chapter 6D (Fundraising) Part 2—Amendments relating to new Chapter 2F.1 (Oppression) Part 3—Amendments relating to new accounting standards provisions in ASIC Act Part 4—Amendments relating to new Chapter 6 (Takeovers) Schedule 5—Consequential amendment of other Acts Air Navigation Act 1920 Commonwealth Authorities and Companies Act 1997 Commonwealth Serum Laboratories Act 1961 Corporations Act 1989 Income Tax Assessment Act 1997 Life Insurance Act 1995 Qantas Sale Act 1992 Schedule 6—Miscellaneous amendments of the Corporations Law Schedule 7—Miscellaneous amendments of other Acts Australian Securities and Investments Commission Act 1989 Financial Sector Reform (Consequential Amendments) Act 1998 Schedule 8—Further amendment of the Corporations Law Schedule 9—Further amendment of other legislation Company Law Review Act 1998 Managed Investments Act 1998 Schedule 10—Amendments consequential on amendment of the Commonwealth Authorities and Companies Act 1997 Aboriginal and Torres Strait Islander Commission Act 1989 Agricultural and Veterinary Chemicals (Administration) Act 1992 Australia Council Act 1975 Australia New Zealand Food Authority Act 1991 Australian Broadcasting Corporation Act 1983 Australian Communications Authority Act 1997 Australian Film Commission Act 1975 Australian Film, Television and Radio School Act 1973 Australian Heritage Commission Act 1975 Australian Horticultural Corporation Act 1987 Australian Institute of Aboriginal and Torres Strait Islander Studies Act 1989 Australian Institute of Health and Welfare Act 1987 Australian Institute of Marine Science Act 1972 Australian Law Reform Commission Act 1996 Australian Maritime Safety Authority Act 1990 Australian National Maritime Museum Act 1990 Australian National University Act 1991 Australian Nuclear Science and Technology Organisation Act 1987 Australian Postal Corporation Act 1989 Australian Prudential Regulation Authority Act 1998 Australian Securities and Investments Commission Act 1989 Australian Sports Commission Act 1989 Australian Tourist Commission Act 1987 Australian Trade Commission Act 1985 Australian War Memorial Act 1980 Australian Wine and Brandy Corporation Act 1980 Australian Wool Research and Promotion Organisation Act 1993 Broadcasting Services Act 1992 Civil Aviation Act 1988 Coal Mining Industry (Long Service Leave Funding) Act 1992 Dairy Produce Act 1986 Defence Housing Authority Act 1987 Employment Services Act 1994 Export Finance and Insurance Corporation Act 1991 Family Law Act 1975 Fisheries Administration Act 1991 Great Barrier Reef Marine Park Act 1975 Health Insurance Commission Act 1973 Hearing Services Act 1991 Horticultural Research and Development Corporation Act 1987 Maritime College Act 1978 National Gallery Act 1975 National Health Act 1953 National Library Act 1960 National Measurement Act 1960 National Museum of Australia Act 1980 National Occupational Health and Safety Commission Act 1985 National Parks and Wildlife Conservation Act 1975 Pig Industry Act 1986 Primary Industries and Energy Research and Development Act 1989 Reserve Bank Act 1959 Safety, Rehabilitation and Compensation Act 1988 Science and Industry Research Act 1949 Snowy Mountains Hydro‑electric Power Act 1949 Special Broadcasting Service Act 1991 Wheat Marketing Act 1989 Schedule 11—Amendment of the Corporations Law to deal with ASC Law and ASC Regulations references Schedule 12—Amendment of other Acts to deal with ASC Law and ASC Regulation references Acts Interpretation Act 1901 Administrative Appeals Tribunal Act 1975 Australian Securities and Investments Commission Act 1989 Corporations Act 1989 Evidence Act 1995 Financial Transaction Reports Act 1988 Acts Interpretation Act 1901 Australian Securities and Investments Commission Act 1989 Corporations Act 1989 An Act to amend the Corporations Law and the Australian Securities and Investments Commission Act 1989, and for related purposes [Assented to 24 November 1999] The Parliament of Australia enacts: 1 Short title This Act may be cited as the Corporate Law Economic Reform Program Act 1999. 2 Commencement (1) Sections 1 and 2 commence on the day on which this Act receives the Royal Assent. (2) The following provisions commence on a day or days to be fixed by Proclamation: (a) section 3; (b) the items in Schedules 1 to 7 (other than item 18 of Schedule 7); (c) the items in Schedules 10, 11 and 12. (3) If any of the following provisions does not commence under subsection (2) within the period of 6 months beginning on the day on which this Act receives the Royal Assent, it commences on the first day after the end of that period: (a) section 3; (b) an item in Schedules 1 to 7 (other than item 18 of Schedule 7); (c) an item in Schedule 10. (4) If an item in Schedule 11 or 12 does not commence under subsection (2) within the period of 12 months beginning on the day on which this Act receives the Royal Assent, it commences on the first day after the end of that period. (5) Item 18 of Schedule 7 is taken to have commenced on the day on which the Financial Sector Reform (Consequential Amendments) Act 1998 received the Royal Assent. (6) The items in Schedule 8 (other than item 3) are taken to have commenced immediately after the Managed Investments Act 1998. (7) Item 3 of Schedule 8 is taken to have commenced immediately after section 27 of the Corporate Law Reform Act 1992. (8) Item 1 of Schedule 9 is taken to have commenced on the day on which the Company Law Review Act 1998 received the Royal Assent. (9) Item 2 of Schedule 9 is taken to have commenced on the day on which the Managed Investments Act 1998 received the Royal Assent. 3 Schedule(s) (1) Subject to section 2, the Corporations Law set out in section 82 of the Corporations Act 1989 is amended as set out in Schedules 1, 3, 6, 8 and 11 to this Act, and any other item in those Schedules has effect according to its terms. (2) Subject to section 2, each Act that is specified in another Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in the Schedule has effect according to its terms. Schedule 1—Main amendments of the Corporations Law 1 Chapters 2D and 2E Repeal the Chapters, substitute: Chapter 2D—Officers and employees Part 2D.1—Duties and powers 179 Background to duties of directors, other officers and employees (1) This Part sets out some of the most significant duties of directors, secretaries, other officers and employees of corporations. Other duties are imposed by other provisions of this Law and other laws (including the general law). (2) Section 9 defines both director and officer. Officer includes, as well as directors and secretaries, some other people who manage the corporation or its property (such as receivers and liquidators). Division 1—General duties 180 Care and diligence—civil obligation only Care and diligence—directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they: (a) were a director or officer of a corporation in the corporation's circumstances; and (b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. Note: This subsection is a civil penalty provision (see section 1317E). Business judgment rule (2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they: (a) make the judgment in good faith for a proper purpose; and (b) do not have a material personal interest in the subject matter of the judgment; and (c) inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and (d) rationally believe that the judgment is in the best interests of the corporation. The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold. Note: This subsection only operates in relation to duties under this section and their equivalent duties at common law or in equity (including the duty of care that arises under the common law principles governing liability for negligence)—it does not operate in relation to duties under any other provision of this Law or under any other laws. (3) In this section: business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation. 181 Good faith—civil obligations Good faith—directors and other officers (1) A director or other officer of a corporation must exercise their powers and discharge their duties: (a) in good faith in the best interests of the corporation; and (b) for a proper purpose. Note 1: This subsection is a civil penalty provision (see section 1317E). Note 2: Section 187 deals with the situation of directors of wholly‑owned subsidiaries. (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). 182 Use of position—civil obligations Use of position—directors, other officers and employees (1) A director, secretary, other officer or employee of a corporation must not improperly use their position to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note: This subsection is a civil penalty provision (see section 1317E). (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). 183 Use of information—civil obligations Use of information—directors, other officers and employees (1) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to: (a) gain an advantage for themselves or someone else; or (b) cause detriment to the corporation. Note 1: This duty continues after the person stops being an officer or employee of the corporation. Note 2: This subsection is a civil penalty provision (see section 1317E). (2) A person who is involved in a contravention of subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: This subsection is a civil penalty provision (see section 1317E). 184 Good faith, use of position and use of information—criminal offences Good faith—directors and other officers (1) A director or other officer of a corporation commits an offence if they: (a) are reckless; or (b) are intentionally dishonest; and fail to exercise their powers and discharge their duties: (c) in good faith in the best interests of the corporation; or (d) for a proper purpose. Note: Section 187 deals with the situation of directors of wholly-owned subsidiaries. Use of position—directors, other officers and employees (2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly: (a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or (b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. Use of information—directors, other officers and employees (3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly: (a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or (b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation. 185 Interaction of sections 180 to 184 with other laws etc. Sections 180 to 184: (a) have effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation; and (b) do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to in paragraph (a). This section does not apply to subsections 180(2) and (3) to the extent to which they operate on the duties at common law and in equity that are equivalent to the requirements of subsection 180(1). 186 Territorial application of sections 180 to 184 Sections 180 to 184 do not apply to an act or omission by a director or other officer or employee of a foreign company unless the act or omission occurred in connection with: (a) the foreign company carrying on business in Australia; or (b) an act that the foreign company does, or proposes to do, in Australia; or (c) a decision by the foreign company whether or not to do, or refrain from doing, an act in Australia. 187 Directors of wholly‑owned subsidiaries A director of a corporation that is a wholly‑owned subsidiary of a body corporate is to be taken to act in good faith in the best interests of the subsidiary if: (a) the constitution of the subsidiary expressly authorises the director to act in the best interests of the holding company; and (b) the director acts in good faith in the best interests of the holding company; and (c) the subsidiary is not insolvent at the time the director acts and does not become insolvent because of the director's act. 188 Responsibility of secretaries and directors for certain contraventions Secretary's functions (1) A secretary of a company contravenes this subsection if the company contravenes: (a) section 142 (requirement for companies to have registered office); or (b) section 145 (requirement for registered office of public company to be open to public); or (c) section 345 (annual returns); or (d) section 205B (lodgment of notices with ASIC). Note: See section 203C for the circumstances in which a company must have a secretary. Consequence if director of proprietary company without secretary does not fulfil secretary's function (2) Each director of a proprietary company contravenes this subsection if: (a) the proprietary company contravenes section 142, 145, 205B or 345; and (b) the proprietary company does not have a secretary when it contravenes that section. Defence (3) A person does not contravene subsection (1) or (2) if they show that they took all reasonable steps to ensure that the company complied with the section. 189 Reliance on information or advice provided by others If: (a) a director relies on information, or professional or expert advice, given or prepared by: (i) an employee of the corporation whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned; or (ii) a professional adviser or expert in relation to matters that the director believes on reasonable grounds to be within the person's professional or expert competence; or (iii) another director or officer in relation to matters within the director's or officer's authority; or (iv) a committee of directors on which the director did not serve in relation to matters within the committee's authority; and (b) the reliance was made: (i) in good faith; and (ii) after making an independent assessment of the information or advice, having regard to the director's knowledge of the corporation and the complexity of the structure and operations of the corporation; and (c) the reasonableness of the director's reliance on the information or advice arises in proceedings brought to determine whether a director has performed a duty under this Part or an equivalent general law duty; the director's reliance on the information or advice is taken to be reasonable unless the contrary is proved. 190 Responsibility for actions of delegate (1) If the directors delegate a power under section 198D, a director is responsible for the exercise of the power by the delegate as if the power had been exercised by the directors themselves. (2) A director is not responsible under subsection (1) if: (a) the director believed on reasonable grounds at all times that the delegate would exercise the power in conformity with the duties imposed on directors of the company by this Law and the company's constitution (if any); and (b) the director believed: (i) on reasonable grounds; and (ii) in good faith; and (iii) after making proper inquiry if the circumstances indicated the need for inquiry; that the delegate was reliable and competent in relation to the power delegated. Division 2—Disclosure of, and voting on matters involving, material personal interests 191 Material personal interest—director's duty to disclose Director's duty to notify other directors of material personal interest when conflict arises (1) A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection (2) says otherwise. (2) The director does not need to give notice of an interest under subsection (1) if: (a) the interest: (i) arises because the director is a member of the company and is held in common with the other members of the company; or (ii) arises in relation to the director's remuneration as a director of the company; or (iii) relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members; or (iv) arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company; or (v) arises merely because the director has a right of subrogation in relation to a guarantee or indemnity referred to in subparagraph (iv); or (vi) relates to a contract that insures, or would insure, the director against liabilities the director incurs as an officer of the company (but only if the contract does not make the company or a related body corporate the insurer); or (vii) relates to any payment by the company or a related body corporate in respect of an indemnity permitted under section 199A or any contract relating to such an indemnity; or (viii) is in a contract, or proposed contract, with, or for the benefit of, or on behalf of, a related body corporate and arises merely because the director is a director of the related body corporate; or (b) the company is a proprietary company and the other directors are aware of the nature and extent of the interest and its relation to the affairs of the company; or (c) all the following conditions are satisfied: (i) the director has already given notice of the nature and extent of the interest and its relation to the affairs of the company under subsection (1) (ii) if a person who was not a director of the company at the time when the notice under subsection (1) was given is appointed as a director of the company—the notice is given to that person (iii) the nature or extent of the interest has not materially increased above that disclosed in the notice; or (d) the director has given a standing notice of the nature and extent of the interest under section 192 and the notice is still effective in relation to the interest. Note: Subparagraph (c)(ii)—the notice may be given to the person referred to in this subparagraph by someone other than the director to whose interests it relates (for example, by the secretary). (3) The notice required by subsection (1) must: (a) give details of: (i) the nature and extent of the interest; and (ii) the relation of the interest to the affairs of the company; and (b) be given at a directors' meeting as soon as practicable after the director becomes aware of their interest in the matter. The details must be recorded in the minutes of the meeting. Effect of contravention by director (4) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing. Section does not apply to single director proprietary company (5) This section does not apply to a proprietary company that has only 1 director. 192 Director may give other directors standing notice about an interest Power to give notice (1) A director of a company who has an interest in a matter may give the other directors standing notice of the nature and extent of the interest in the matter in accordance with subsection (2). The notice may be given at any time and whether or not the matter relates to the affairs of the company at the time the notice is given. Note: The standing notice may be given to the other directors before the interest becomes a material personal interest. (2) The notice under subsection (1) must: (a) give details of the nature and extent of the interest; and (b) be given: (i) at a directors' meeting (either orally or in writing); or (ii) to the other directors individually in writing. The standing notice is given under subparagraph (b)(ii) when it has been given to every director. Standing notice must be tabled at meeting if given to directors individually (3) If the standing notice is given to the other directors individually in writing, it must be tabled at the next directors' meeting after it is given. Nature and extent of interest must be recorded in minutes (4) The director must ensure that the nature and extent of the interest disclosed in the standing notice is recorded in the minutes of the meeting at which the standing notice is given or tabled. Dates of effect and expiry of standing notice (5) The standing notice: (a) takes effect as soon as it is given; and (b) ceases to have effect if a person who was not a director of the company at the time when the notice was given is appointed as a director of the company. A standing notice that ceases to have effect under paragraph (b) commences to have effect again if it is given to the person referred to in that paragraph. Note: The notice may be given to the person referred to in paragraph (b) by someone other than the director to whose interests it relates (for example, by the secretary). Effect of material increase in nature or extent of interest (6) The standing notice ceases to have effect in relation to a particular interest if the nature or extent of the interest materially increases above that disclosed in the notice. Effect of contravention by director (7) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing. 193 Interaction of sections 191 and 192 with other laws etc. Sections 191 and 192 have effect in addition to, and not in derogation of: (a) any general law rule about conflicts of interest; and (b) any provision in a company's constitution (if any) that restricts a director from: (i) having a material personal interest in a matter; or (ii) holding an office or possessing property; involving duties or interests that conflict with their duties or interests as a director. 194 Voting and completion of transactions—directors of proprietary companies (replaceable rule—see section 135) If a director of a proprietary company has a material personal interest in a matter that relates to the affairs of the company and: (a) under section 191 the director discloses the nature and extent of the interest and its relation to the affairs of the company at a meeting of the directors; or (b) the interest is one that does not need to be disclosed under section 191; then: (c) the director may vote on matters that relate to the interest; and (d) any transactions that relate to the interest may proceed; and (e) the director may retain benefits under the transaction even though the director has the interest; and (f) the company cannot avoid the transaction merely because of the existence of the interest. If disclosure is required under section 191, paragraphs (e) and (f) apply only if the disclosure is made before the transaction is entered into. Note: A director may need to give notice to the other directors if the director has a material personal interest in a matter relating to the affairs of the company (see section 191). 195 Restrictions on voting—directors of public companies only Restrictions on voting and being present (1) A director of a public company who has a material personal interest in a matter that is being considered at a directors' meeting must not: (a) be present while the matter is being considered at the meeting; or (b) vote on the matter; unless: (c) subsection (2) or (3) allows the director to be present; or (d) the interest does not need to be disclosed under section 191. Participation with approval of other directors (2) The director may be present and vote if directors who do not have a material personal interest in the matter have passed a resolution that: (a) identifies the director, the nature and extent of the director's interest in the matter and its relation to the affairs of the company; and (b) states that those directors are satisfied that the interest should not disqualify the director from voting or being present. Participation with ASIC approval (3) The director may be present and vote if they are so entitled under a declaration or order made by ASIC under section 196. Director may consider or vote on resolution to deal with matter at general meeting (4) If there are not enough directors to form a quorum for a directors' meeting because of subsection (1), 1 or more of the directors (including those who have a material personal interest in that matter) may call a general meeting and the general meeting may pass a resolution to deal with the matter. Effect of contravention by director (5) A contravention by a director of: (a) this section; or (b) a condition attached to a declaration or order made by ASIC under section 196; does not affect the validity of any resolution. 196 ASIC power to make declarations and class orders ASIC's power to make specific declarations (1) ASIC may declare in writing that a director of a public company who has a material personal interest in a matter that is being, or is to be, considered at a directors' meeting may, despite the director's interest, be present while the matter is being considered at the meeting, vote on the matter, or both be present and vote. However, ASIC may only make the declaration if: (a) the number of directors entitled to be present and vote on the matter would be less than the quorum for a directors' meeting if the director were not allowed to vote on the matter at the meeting; and (b) the matter needs to be dealt with urgently, or there is some other compelling reason for the matter being dealt with at the directors' meeting, rather than by a general meeting called under subsection 195(4). (2) The declaration may: (a) apply to all or only some of the directors; or (b) specify conditions that the company or director must comply with. ASIC's power to make class orders (3) ASIC may make an order in writing that enables directors who have a material personal interest in a matter to be present while the matter is being considered at a directors' meeting, vote on that matter, or both be present and vote. The order may be made in respect of a specified class of public companies, directors, resolutions or interests. (4) The order may be expressed to be subject to conditions. (5) Notice of the making, revocation or suspension of the order must be published in the Gazette. Division 3—Duty to discharge certain trust liabilities 197 Directors liable for debts and other obligations incurred by corporation as trustee (1) A person who is a director of a corporation when it incurs a liability while acting, or purporting to act, as trustee, is liable to discharge the whole or a part of the liability if the corporation: (a) has not, and cannot, discharge the liability or that part of it; and (b) is not entitled to be fully indemnified against the liability out of trust assets. This is so even if the trust does not have enough assets to indemnify the trustee. The person is liable both individually and jointly with the corporation and anyone else who is liable under this subsection. (2) The person is not liable under subsection (1) if the person would be entitled to have been fully indemnified by 1 of the other directors against the liability had all the directors of the corporation been trustees when the liability was incurred. (3) This section does not apply to a liability incurred outside Australia by a foreign company. Division 4—Powers 198A Powers of directors (replaceable rule—see section 135) (1) The business of a company is to be managed by or under the direction of the directors. Note: See section 198E for special rules about the powers of directors who are the single director/shareholder of proprietary companies. (2) The directors may exercise all the powers of the company except any powers that this Law or the company's constitution (if any) requires the company to exercise in general meeting. Note: For example, the directors may issue shares, borrow money and issue debentures. 198B Negotiable instruments (replaceable rule—see section 135) (1) Any 2 directors of a company that has 2 or more directors, or the director of a proprietary company that has only 1 director, may sign, draw, accept, endorse or otherwise execute a negotiable instrument. (2) The directors may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way. 198C Managing director (replaceable rule—see section 135) (1) The directors of a company may confer on a managing director any of the powers that the directors can exercise. (2) The directors may revoke or vary a conferral of powers on the managing director. 198D Delegation (1) Unless the company's constitution provides otherwise, the directors of a company may delegate any of their powers to: (a) a committee of directors; or (b) a director; or (c) an employee of the company; or (d) any other person. Note: The delegation must be recorded in the company's minute book (see section 251A). (2) The delegate must exercise the powers delegated in accordance with any directions of the directors. (3) The exercise of the power by the delegate is as effective as if the directors had exercised it. 198E Single director/shareholder proprietary companies Powers of director (1) The director of a proprietary company who is its only director and only shareholder may exercise all the powers of the company except any powers that this Law or the company's constitution (if any) requires the company to exercise in general meeting. The business of the company is to be managed by or under the direction of the director. Note: For example, the director may issue shares, borrow money and issue debentures. Negotiable instruments (2) The director of a proprietary company who is its only director and only shareholder may sign, draw, accept, endorse or otherwise execute a negotiable instrument. The director may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way. 198F Right of access to company books Right while director (1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding: (a) to which the person is a party; or (b) that the person proposes in good faith to bring; or (c) that the person has reason to believe will be brought against them. Note: Section 290 gives the director a right of access to financial records. Right during 7 years after ceasing to be director (2) A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding: (a) to which the person is a party; or (b) that the person proposes in good faith to bring; or (c) that the person has reason to believe will be brought against them. This right continues for 7 years after the person ceased to be a director of the company. Right to take copies (3) A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings. Company not to refuse access (4) A company must allow a person to exercise their rights to inspect or take copies of the books under this section. Interaction with other rules (5) This section does not limit any right of access to company books that a person has apart from this section. Part 2D.2—Restrictions on indemnities, insurance and termination payments Division 1—Indemnities and insurance for officers and auditors 199A Indemnification and exemption of officer or auditor Exemptions not allowed (1) A company or a related body corporate must not exempt a person (whether directly or through an interposed entity) from a liability to the company incurred as an officer or auditor of the company. When indemnity for liability (other than for legal costs) not allowed (2) A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company: (a) a liability owed to the company or a related body corporate (b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 1317H (c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith. This subsection does not apply to a liability for legal costs. When indemnity for legal costs not allowed (3) A company or related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against legal costs incurred in defending an action for a liability incurred as an officer or auditor of the company if the costs are incurred: (a) in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under subsection (2); or (b) in defending or resisting criminal proceedings in which the person is found guilty; or (c) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or (d) in connection with proceedings for relief to the person under this Law in which the Court denies the relief. Paragraph (c) does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order. Note 1: Paragraph (c)—This includes proceedings by ASIC for an order under section 206C, 206D or 206E (disqualification), section 232 (oppression), section 1317E, 1317G or 1317H (civil penalties) or section 1324 (injunction). Note 2: The company may be able to give the person a loan or advance in respect of the legal costs (see section 212). (4) For the purposes of subsection (3), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings. 199B Insurance premiums for certain liabilities of director, secretary, other officer or auditor A company or a related body corporate must not pay, or agree to pay, a premium for a contract insuring a person who is or has been an officer or auditor of the company against a liability (other than one for legal costs) arising out of: (a) conduct involving a wilful breach of duty in relation to the company; or (b) a contravention of section 182 or 183. This section applies to a premium whether it is paid directly or through an interposed entity. 199C Certain indemnities, exemptions, payments and agreements not authorised and certain documents void (1) Sections 199A and 199B do not authorise anything that would otherwise be unlawful. (2) Anything that purports to indemnify or insure a person against a liability, or exempt them from a liability, is void to the extent that it contravenes section 199A or 199B. Division 2—Termination payments 200A When benefit given in connection with retirement from office (1) For the purposes of this Division: (a) a benefit is given in connection with a person's retirement from an office if the benefit is given: (i) by way of compensation for, or otherwise in connection with, the loss by the person of the office; or (ii) in connection with the person's retirement from the office; and (b) giving a benefit includes: (i) if the benefit is a payment—making the payment; and (ii) if the benefit is an interest in property—transferring the interest; and (c) a person gives a benefit even if the person is obliged to give the benefit under a contract; and (d) a pension or lump sum is paid or payable in connection with the person's retirement from an office if the pension or lump sum is paid or payable: (i) by way of compensation for, or otherwise in connection with, the loss by the person of the office; or (ii) in connection with the person's retirement from the office; and (e) retirement from an office includes: (i) loss of the office; and (ii) resignation from the office; and (iii) death of a person at a time when they hold the office. (2) For the purposes of this Division, if: (a) a person (person A) gives another person a benefit (benefit A); and (b) person A gives benefit A for the purpose, or for purposes including the purpose, of enabling or assisting someone to give a person a benefit in connection with the retirement of a person (person B) from an office; person A is taken to give benefit A in connection with the person B's retirement from that office. 200B Retirement benefits generally need membership approval Benefits in connection with retirement from board or managerial office (1) The following must not give a person a benefit in connection with that person's, or someone else's, retirement from a board or managerial office in a company, or a related body corporate, without member approval under section 200E: (a) the company (b) an associate of the company (other than a body corporate that is related to the company and is itself a company) (c) a prescribed superannuation fund in relation to the company. Note 1: Sections 200F, 200G and 200H provide for exceptions to this rule. Note 2: Section 9 defines board or managerial office. Prescribed superannuation funds (2) For the purposes of this section: (a) a superannuation fund is taken to be a prescribed superannuation fund in relation to a company if the company, or an associate of the company, gives a benefit to the superannuation fund in prescribed circumstances; and (b) if a prescribed superannuation fund in relation to a company gives a benefit to another superannuation fund in prescribed circumstances, the other superannuation fund is taken to be a prescribed superannuation fund in relation to the company. Prescribed circumstances (3) For the purposes of this section, if: (a) a company, or an associate of a company, gives a benefit to a superannuation fund solely for the purpose of enabling or assisting the superannuation fund to give to a person a benefit in connection with a person's retirement from an office in the company or a related body corporate; or (b) a superannuation fund gives a benefit to another superannuation fund solely for the purpose of enabling or assisting the other superannuation fund to give to a person a benefit in connection with a person's retirement from an office in a company or a related body corporate; the benefit first referred to in paragraph (a) or (b) is taken to be given in prescribed circumstances. (4) In this section: superannuation fund means a provident, benefit, superannuation or retirement fund. 200C Benefits on transfer of undertaking or property need membership approval A person must not give a benefit to a person who: (a) holds, or has at any previous time held, a board or managerial office in a company or a related body corporate; or (b) is the spouse of a person referred to in paragraph (a); or (c) is a relative of a person referred to in paragraph (a) or of the spouse of such a person; or (d) is an associate of a person referred to in paragraph (a) or the spouse of an associate of such a person; in connection with the transfer of the whole or any part of the undertaking or property of the company without member approval under section 200E. Note: Section 9 defines board or managerial office. 200D Contravention to receive benefit without member approval A person who: (a) holds, or has at any previous time held, a board or managerial office in a company or related body corporate; or (b) is the spouse of a person referred to in paragraph (a); or (c) is a relative of a person referred to in paragraph (a) or of the spouse of such a person; or (d) is an associate of a person referred to in paragraph (a) or the spouse of an associate of such a person; must not receive a benefit if the giving of the benefit contravenes section 200B or 200C. Note: Section 9 defines board or managerial office. 200E Approval by members (1) If section 200B or 200C requires member approval for giving a person a benefit, it must be approved by a resolution passed at a general meeting of: (a) the company; and (b) if the company is a subsidiary of a listed domestic corporation—the listed corporation; and (c) if the company has a holding company that: (i) is a domestic corporation that is not listed; and (ii) is not itself a subsidiary of a domestic corporation—the holding company. (2) Details of the benefit must be set out in, or accompany, the notice of the meeting at which the resolution is to be considered. The details must include: (a) if the proposed benefit is a payment: (i) the amount of the payment; or (ii) if that amount cannot be ascertained at the time of the disclosure—the manner in which that amount is to be calculated and any matter, event or circumstance that will, or is likely to, affect the calculation of that amount; and (b) otherwise: (i) the money value of the proposed prescribed benefit; or (ii) if that value cannot be ascertained at the time of the disclosure—the manner in which that value is to be calculated and any matter, event or circumstance that will, or is likely to, affect the calculation of that value. These requirements are in addition to, and not in derogation of, any other law that requires disclosure to be made with respect to giving or receiving a benefit. (3) The approval extends to the giving of another benefit to the person if: (a) the other benefit is given to the person instead of the proposed benefit; and (b) the amount or money value of the benefit is less than the amount or money value of the proposed benefit. (4) The approval does not relieve a director of a body corporate from any duty to the body corporate (whether under section 180,181,182,183 or 184 or otherwise and whether of a fiduciary nature or not) in connection with the giving of the benefit. 200F Exempt benefits and benefits given in certain circumstances Subsection 200B(1) does not apply to: (a) a benefit given in connection with a person's retirement from an office in relation to a company if the benefit is: (i) given under an agreement entered into before 1 January 1991 if giving the benefit in accordance with the agreement would have been lawful if the benefit were given when the agreement was entered into; or (ii) a genuine payment by way of damages for breach of contract; or (iii) given to the person under an agreement made between the company and the person before the person became the holder of the office as the consideration, or part of the consideration, for the person agreeing to hold the office; or (iv) a payment made in respect of leave of absence to which the person is entitled under an industrial instrument; or (b) a benefit given in prescribed circumstances. 200G Genuine payments of pension and lump sum (1) Subsection 200B(1) does not apply to a benefit if: (a) the benefit is a payment in connection with a person's retirement from a board or managerial office (the relevant office) in a company or a related body corporate; and (b) the payment is for past services the person rendered to: (i) the company; or (ii) a related body corporate; or (iii) a body that was a related body corporate of the company when the past services were rendered; and (c) the value of the benefit, when added to the value of all other payments (if any) already made or payable in connection with the person's retirement from board or managerial offices in the company and related bodies corporate does not exceed the payment limit set by subsection (1A). In applying paragraph (c), disregard any pensions or lump sums that section 200F applies to. (2) The payment limit is: (a) the amount worked out under subsection (3) if the person: (i) was an eligible employee in relation to the company at the time when the person retired from the relevant office; and (ii) has been an eligible employee in relation to the company throughout a period (the relevant period), or throughout periods totalling a period (also the relevant period), of more than 3 years; or (b) otherwise—the total remuneration of the person from the company and related bodies corporate during the period of 3 years ending when the person retired from the relevant office. Note: Section 9 defines remuneration. (3) The amount worked out under this subsection is the amount worked out using the formula: where: total remuneration is the amount of the total remuneration of the person from the company and related bodies corporate during the last 3 years of the relevant period. relevant period is the number of years in the relevant period or 7, whichever is the lesser number. (4) In determining for the purposes of paragraph (1)(c) the value of a pension or lump sum payment, disregard any part of the pension or lump sum payment that is attributable to: (a) a contribution made by the person; or (b) a contribution made by a person other than: (i) the company; or (ii) a body corporate (a relevant body corporate) that is a related body corporate of the company, or that was, when the contribution was made, such a related body corporate; or (iii) an associate of the company, or of a relevant body corporate, in respect of: (A) the payment of the pension, or the making of the lump sum payment, as the case may be; or (B) the making of the contribution. (5) For the purposes of subparagraph (2)(a), a person is taken to have been an eligible employee in relation to a company at a particular time if: (a) the person was a genuine full‑time employee of the company at that time; or (b) the person was a genuine full‑time employee of a body corporate at that time and the body corporate was related to the company at that time. (6) In this section: payment means a payment by way of pension or lump sum and includes a superannuation, retiring allowance, superannuation gratuity or similar payment. 200H Benefits required by law Subsection 200B(1) does not apply to a benefit given by a person if failure to give the benefit would constitute a contravention of a law in force in Australia or elsewhere (otherwise than because of breach of contract or breach of trust). 200J Benefits to be held in trust for company (1) If giving a benefit to a person contravenes section 200B, then: (a) if the benefit is a payment—the amount of the payment; or (b) otherwise—the money value of the prescribed benefit; is taken to be received by the person in trust for the company concerned. (2) Subsection (1) applies to the whole of the amount of a payment or of the money value of the benefit even though giving the benefit would not have contravened section 200B if that amount or value of the benefit had been less. Part 2D.3—Appointment, remuneration and cessation of appointment of directors Division 1—Appointment of directors 201A Minimum number of directors Proprietary companies (1) A proprietary company must have at least 1 director. That director must ordinarily reside in Australia. Public companies (2) A public company must have at least 3 directors (not counting alternate directors). At least 2 directors must ordinarily reside in Australia. 201B Who can be a director (1) Only an individual who is at least 18 may be appointed as a director of a company. (2) A person who is disqualified from managing corporations under Part 2D.6 may only be appointed as director of a company if the appointment is made with permission granted by ASIC under section 206F or leave granted by the Court under section 206G. 201C Directors of public companies, or subsidiaries, over 72 (1) A person who has turned 72 may only be appointed or act as a director of: (a) a public company; or (b) a company that is a subsidiary of a public company; if authorised to do so under this section. (2) A person may act as a director of a company during the period that: (a) starts on the day on which they turn 72; and (b) ends at the conclusion of the AGM beginning next after that day. (3) The office of a director of a public company, or of a subsidiary of a public company, becomes vacant at the conclusion of the AGM of the public company, or the subsidiary, beginning next after the director turns 72. (4) If a proprietary company is a subsidiary of a public company: (a) subsection (3) does not apply to it; and (b) a person may continue to act as a director of the proprietary company until the next AGM of the public company after the person turns 72; and (c) the person's office of director becomes vacant at the end of that meeting. Note: Proprietary companies do not need to hold annual general meetings (see section 250N). (5) An act done by a person as a director is valid even if it is afterwards discovered that they had turned 72 at the time when they were appointed or that their appointment had terminated under subsection (3) or (4). (6) If the office of a director has become vacant under subsection (3) or (4), no provision for the automatic re‑appointment of retiring directors in default of another appointment applies in relation to that director. (7) If a vacancy created under subsection (3) or (4) is not filled at the meeting at which the office became vacant, the office may be filled as a casual vacancy. (8) Subject to subsections (9) and (10), a person who has turned 72 may by special resolution be appointed or re‑appointed as a director of that company to hold office until the conclusion of the company's next AGM company if: (a) the resolution states the person's age; and (b) the notice of meeting states that the person is a candidate for election who has turned 72 and states the person's age. (9) If the company is a subsidiary of a public company, the appointment or re‑appointment referred to in subsection (8) does not have effect unless: (a) the person appointed or re‑appointed is a director of the public company; or (b) the appointment or re‑appointment of the person as a director of the company has been approved by a special resolution of the public company and the notice of meeting states that the person is a candidate for election as a director of the company who has turned 72 and states the person's age. (10) If the subsidiary is a proprietary company: (a) the person may be appointed or re‑appointed as a director of the subsidiary until the end of the next AGM of the holding company; and (b) the appointment does not need a resolution under subsection (8); and (c) the appointment must satisfy either paragraph (9)(a) or (b). (11) If: (a) the constitution of a company limited by guarantee provides for the holding of postal ballots for the election of a director or directors; and (b) a postal ballot for the election of a director or directors is held and in the ballot: (i) the members entitled to vote have been given notice in writing by the company stating that a candidate for election has turned 72 and stating the age of the candidate; and (ii) that candidate is elected by a majority of not less than 75% of the members who, being entitled to vote, vote in the ballot; that candidate may be appointed or re‑appointed as a director to hold office until the conclusion of the next AGM of the company. (12) If: (a) the constitution of a company limited by guarantee provides for the election or appointment of a director or directors otherwise than by members at a general meeting or by postal ballot of members; and (b) ASIC declares in writing that this section does not apply to the company or its directors; then, subject to the conditions (if any) that ASIC specifies in the declaration, this section does not so apply. (13) A vacancy in the office of a director occurring under subsection (3) or (4) is not to be taken into account in determining when other directors are to retire. (14) Nothing in this section limits, or affects the operation of, any provision of a company's constitution that prevents any person from being appointed as a director or requiring any director to vacate their office at any age less than 72 years. 201D Consent to act as director (1) A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed. (2) The company must keep the consent. 201E Special rules for the appointment of public company directors (1) A resolution passed at a general meeting of a public company appointing or confirming the appointment of 2 or more directors is void unless: (a) the meeting has resolved that the appointments or confirmations may be voted on together; and (b) no votes were cast against the resolution. (2) This section does not affect: (a) a resolution to appoint directors by an amendment to the company's constitution (if any); or (b) a ballot or poll to elect 2 or more directors if the ballot or poll does not require members voting for 1 candidate to vote for another candidate. (3) For the purposes of paragraph (2)(b), a ballot or poll does not require a member to vote for a candidate merely because the member is required to express a preference among individual candidates in order to cast a valid vote. 201F Special rules for the appointment of directors for single director/single shareholder proprietary companies (1) The director of a proprietary company who is its only director and only shareholder may appoint another director by recording the appointment and signing the record. Appointment of new director on death, mental incapacity or bankruptcy (2) If a person who is the only director and the only shareholder of a proprietary company: (a) dies; or (b) cannot manage the company because of the person's mental incapacity; and a personal representative or trustee is appointed to administer the person's estate or property, the personal representative or trustee may appoint a person as the director of the company. (3) If: (a) the office of the director of a proprietary company is vacated under subsection 206B(3) or (4) because of the bankruptcy of the director; and (b) the person is the only director and the only shareholder of the company; and (c) a trustee in bankruptcy is appointed to the person's property; the trustee may appoint a person as the director of the company. (4) A person who has a power of appointment under subsection (2) or (3) may appoint themselves as director. (5) A person appointed as a director of a company under subsection (2), (3) or (4) holds office as if they had been appointed in the usual way. 201G Company may appoint a director (replaceable rule—see section 135) A company may appoint a person as a director by resolution passed in general meeting. 201H Directors may appoint other directors (replaceable rule—see section 135) Appointment by other directors (1) The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors' meeting even if the total number of directors of the company is not enough to make up that quorum. Proprietary company—confirmation by meeting within 2 months (2) If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months. Public company—confirmation by next AGM (3) If a person is appointed by the other directors as a director of a public company, the company must confirm the appointment by resolution at the company's next AGM. If the appointment is not confirmed, the person ceases to be a director of the company at the end of the AGM. 201J Appointment of managing directors (replaceable rule—see section 135) The directors of a company may appoint 1 or more of themselves to the office of managing director of the company for the period, and on the terms (including as to remuneration), as the directors see fit. 201K Alternate directors (replaceable rule—see section 135) (1) With the other directors' approval, a director may appoint an alternate to exercise some or all of the director's powers for a specified period. (2) If the appointing director requests the company to give the alternate notice of directors' meetings, the company must do so. (3) When an alternate exercises the director's powers, the exercise of the powers is just as effective as if the powers were exercised by the director. (4) The appointing director may terminate the alternate's appointment at any time. (5) An appointment or its termination must be in writing. A copy must be given to the company. Note: ASIC must be given notice of the appointment and termination of appointment of an alternate (see subsections 205B(2) and (5)). 201L Signpost—ASIC to be notified of appointment Under section 205B, a company must notify ASIC within 14 days if a person is appointed as a director or as an alternate director. 201M Effectiveness of acts by directors (1) An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Law. (2) Subsection (1) does not deal with the question whether an effective act by a director: (a) binds the company in its dealings with other people; or (b) makes the company liable to another person. Note: The kinds of acts that this section validates are those that are only legally effective if the person doing them is a director (for example, calling a meeting of the company's members or signing a document to be lodged with ASIC or minutes of a meeting). Sections 128‑130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers. Division 2—Remuneration of directors 202A Remuneration of directors (replaceable rule—see section 135) (1) The directors of a company are to be paid the remuneration that the company determines by resolution. Note: Chapter 2E makes special provision for the payment of remuneration to the directors of public companies. (2) The company may also pay the directors' travelling and other expenses that they properly incur: (a) in attending directors' meetings or any meetings of committees of directors; and (b) in attending any general meetings of the company; and (c) in connection with the company's business. 202B Members may obtain information about directors' remuneration (1) A company must disclose the remuneration paid to each director of the company or a subsidiary (if any) by the company or by an entity controlled by the company if the company is directed to disclose the information by: (a) members with at least 5% of the votes that may be cast at a general meeting of the company; or (b) at least 100 members who are entitled to vote at a general meeting of the company. The company must disclose all remuneration paid to the director, regardless of whether it is paid to the director in relation to their capacity as director or another capacity. (2) The company must comply with the direction as soon as practicable by: (a) preparing a statement of the remuneration of each director of the company or subsidiary for the last financial year before the direction was given; and (b) having the statement audited; and (c) sending a copy of the audited statement to each person entitled to receive notice of general meetings of the company. 202C Special rule for single director/single shareholder proprietary companies A person who is the only director and the only shareholder of a proprietary company is to be paid any remuneration for being a director that the company determines by resolution. The company may also pay the director's travelling and other expenses properly incurred by the director in connection with the company's business. Division 3—Resignation, retirement or removal of directors 203A Director may resign by giving written notice to company (replaceable rule—see section 135) A director of a company may resign as a director of the company by giving a written notice of resignation to the company at its registered office. 203B Signpost to consequences of disqualification from managing corporations A person ceases to be a director of a company if the person becomes disqualified from managing corporations under Part 2D.6 (see subsection 206A(2)) unless ASIC or the Court allows them to manage the company (see sections 206F and 206G). 203C Removal by members—proprietary companies (replaceable rule—see section 135) A proprietary company: (a) may by resolution remove a director from office; and (b) may by resolution appoint another person as a director instead. 203D Removal by members—public companies Resolution for removal of director (1) A public company