One of the most prominent and important roles within a company is a director, and the appointing of new directors to any company must be conducted lawfully, which is why commercial lawyers should be approached to ensure that the correct legal process is followed.
A change of director can occur for several reasons such as retirement, relocation, new shareholders and thus control of the business changing, or the business expanding and therefore a need for more directors to help manage it.
Whatever the reasons might be, the removal or appointment of any director must be done within ASIC regulations as well as commercial and company law. Read on to find out all you need to know if your company has any imminent director changes.
Appointing New Directors To A Company
Companies indeed come in all sizes and all types, and thus it is reasonable to state that each will have different processes and procedures across a range of matters, and that includes appointing one or more new directors.
For example, a large company that has a constitution and a shareholders’ agreement, will be obliged to follow the procedures that are set out in those documents. Alternatively, smaller companies that might not have a written constitution or a single shareholder and thus no shareholders’ agreement, must therefore follow what are called ‘replaceable rules’ which are found in the 2021 Corporations Act.
The Replaceable Rules
The Corporations Act of 2021 contains the ‘replaceable rules’ which are simple rules which must be followed concerning the management of a company. Where that company does not have a written constitution that covers director changes, then the ‘replaceable rules’ will apply. Those rules state that a new director can be appointed to the company either by the existing board of directors or by a resolution passed at a meeting of the company’s shareholders.
If it is the former which occurs, then shareholders must approve the new director who has been appointed by the company’s board of directors. This must be done within two months if the company is a private company, or at the next annual meeting of the company’s shareholders if it is a publicly listed company.
Rules Concerning Who Can Be Appointed As A Company Director
Thankfully, there is not an avalanche of rules that relate to who can or cannot be a company director, so most people whom a company’s board or shareholders wish to appoint should qualify. However, there are some exceptions, and they are that if any of the following apply to an individual, they cannot be appointed as director to any company.
- They are bankrupt
- They are insolvent
- They are banned from managing a company by the courts
- They are banned from managing a company by the ASIC
- They have a criminal conviction for offences that include dishonesty such as fraud
The only other rules are that any proposed director must have given their written consent to being considered for the role and are willing to also take on the responsibilities that follow from taking the role of director. The company must keep this declaration on file and make it available for inspection at any time. Finally, the minimum age for someone to become a company director is 18 years.
The only other administrative task for the lawful appointment of a new director to the company is that the appointment details must be entered into Form 484 and sent to the ASIC within 28 days of the director’s appointment. If this is not completed in that time, the company may be liable to pay a late fee.