Corporations Act 2001

CHAPTER 2D - OFFICERS AND EMPLOYEES  

PART 2D.1 - DUTIES AND POWERS  

SECTION 179  

179   SIMPLIFIED OUTLINE OF THIS PART  

Division 1 - General duties  

Note: This Division applies in relation to CCIVs in a modified form: see sections 1224C .

SECTION 180   CARE AND DILIGENCE - CIVIL OBLIGATION ONLY  

180(1)   Care and diligence - directors and other officers.  

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).

180(2)   Business judgment rule.  

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 Act or under any other laws.

180(3)   [ ``business judgment'']  

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.

SECTION 181   GOOD FAITH - CIVIL OBLIGATIONS  

181(1)   Good faith - directors and other officers.  

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.

181(2)   [ Person involved in contravention]  

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).

SECTION 182   USE OF POSITION - CIVIL OBLIGATIONS  

182(1)   Use of position - directors, other officers and employees.  

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).

182(2)   [ Person involved in contravention]  

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).

SECTION 183   USE OF INFORMATION - CIVIL OBLIGATIONS  

183(1)   Use of information - directors, other officers and employees.  

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).

183(2)   [ Person involved in contravention]  

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).

SECTION 184   GOOD FAITH, USE OF POSITION AND USE OF INFORMATION - CRIMINAL OFFENCES  
Good faith - directors and other officers

184(1)    
A director or other officer of a corporation commits an offence if they:

(a) are reckless; or

(b) are 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

184(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.

184(2A)    

To avoid doubt, it is not a defence in a proceeding for an offence against subsection (2) that the director, other officer or employee of the corporation uses their position dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for the corporation; or

(b) with the result that the corporation directly or indirectly gained an advantage.

Use of information - directors, other officers and employees

184(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.

184(4)    

To avoid doubt, it is not a defence in a proceeding for an offence against subsection (3) that the person uses the information dishonestly:

(a) with the intention of directly or indirectly gaining an advantage for the corporation; or

(b) with the result that the corporation directly or indirectly gained an advantage.

SECTION 185  

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).

SECTION 186  

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 this jurisdiction; or

(b) an act that the foreign company does, or proposes to do, in this jurisdiction; or

(c) a decision by the foreign company whether or not to do, or refrain from doing, an act in this jurisdiction.

SECTION 187  

187   DIRECTORS OF WHOLLY-OWNED SUBSIDIARIES  
A director of a corporation that is a wholly-owned subsidiary of a body corporate is 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.

SECTION 188   RESPONSIBILITY OF SECRETARIES ETC. FOR CERTAIN CORPORATE CONTRAVENTIONS  

Responsibility of company secretaries

188(1)    
A secretary of a company contravenes this subsection if the company contravenes any of the following provisions (each of which is a corporate responsibility provision ):

(a)    section 142 (registered office);

(b)    section 145 (public company ' s registered office to be open to public);

(c)    

section 146 (change of principal place of business);

(d)    section 178A (change to proprietary company ' s member register);

(e)    

section 178C (change to proprietary company ' s share structure);

(ea)    

subsection 203AA(6) (notification of resignation day);

(f)    

section 205B (lodgement of notices with ASIC);

(g)    

section 254X (issue of shares);

(h)    

section 319 (lodgement of annual reports with ASIC);

(i)    

section 320 (lodgement of half-year reports with ASIC);

(j)    

section 346C (response to extract of particulars);

(k)    section 348D (response to return of particulars);

(l)    section 349A (change to proprietary company ' s ultimate holding company).

Note 1: See section 204A for the circumstances in which a company must have a secretary.

Note 2: This subsection is a civil penalty provision (see section 1317E ).

Note 3: This subsection has an extended operation in relation to the secretary of a corporate director of a CCIV: see sections 1225A and 1225B .

Responsibility of directors of proprietary companies

188(2)    
Each director of a proprietary company contravenes this subsection if:

(a)    

the proprietary company contravenes a corporate responsibility provision; and

(b)    the proprietary company does not have a secretary whenit contravenes that provision.

Note 1: See section 204A for the circumstances in which a company must have a secretary.

Note 2: This subsection is a civil penalty provision (see section 1317E ).

Defence of reasonable steps

188(3)    
A person does not contravene subsection (1) or (2) in relation to a company ' s contravention of a corporate responsibility provision if the person shows that he or she took reasonable steps to ensure that the company complied with the provision.

SECTION 189  

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.

SECTION 190   RESPONSIBILITY FOR ACTIONS OF DELEGATE  

190(1)   [ Delegation by director]  

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.

190(2)   [ Director not responsible in certain circumstances]  

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 Act 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.

SECTION 190A  

190A   LIMITED APPLICATION OF DIVISION TO REGISTRABLE AUSTRALIAN BODIES  
This Division does not apply to an act or omission by a director or other officer or employee of a corporation that is a registrable Australian body unless the act or omission occurred in connection with:

(a) the body carrying on business outside its place of origin; or

(b) an act that the body does or proposed to do outside its place of origin; or

(c) a decision by the body whether or not to do or refrain from doing outside its place of origin.

SECTION 190B  

190B   DIVISION DOES NOT APPLY TO ABORIGINAL AND TORRES STRAIT ISLANDER CORPORATIONS  

This Division does not apply to a corporation that is an Aboriginal and Torres Strait Islander corporation.

Note: Division 265 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 deals with the general duties of directors, secretaries, officers and employees of Aboriginal and Torres Strait Islander corporations.

SECTION 190C  

190C   DIVISION DOES NOT APPLY IN RELATION TO NOTIFIED FOREIGN PASSPORT FUNDS OR THEIR OPERATORS  
This Division does not apply to an act or omission by a person, if:

(a) the act or omission is in the person ' s capacity as a director, other officer or employee of a notified foreign passport fund; or

(b) the act or omission:

(i) is in the person ' s capacity as a director, other officer or employee of the operator of a notified foreign passport fund; and

(ii) is connected with the operation of the fund.

Division 2 - Disclosure of, and voting on matters involving, material personal interests  

Note: This Division applies in relation to CCIVs in a modified form: see sections 1225C and 1224K .

SECTION 191   MATERIAL PERSONAL INTEREST - DIRECTOR'S DUTY TO DISCLOSE  

191(1)   Director's duty to notify other directors of material personal interest when conflict arises.  

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.

191(1A)   [ Strict liability offence]  

For an offence based on subsection (1), strict liability applies to the circumstance, that the director of a company has a material personal interest in a matter that relates to the affairs of the company.

Note: For strict liability , see section 6.1 of the Criminal Code .

191(2)   [ Notice not required in certain circumstances]  

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).

191(3)   [ Notice requirements]  

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.

191(4)   Effect of contravention by director.  

A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

191(5)   Section does not apply to single director proprietary company.  

This section does not apply to a proprietary company that has only 1 director.

SECTION 192   DIRECTOR MAY GIVE OTHER DIRECTORS STANDING NOTICE ABOUT AN INTEREST  

192(1)   Power to give notice.  

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.

192(2)   [ Notice requirements]  

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.

192(3)   Standing notice must be tabled at meeting if given to directors individually.  

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.

192(4)   Nature and extent of interest must be recorded in minutes.  

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.

192(5)   Dates of effect and expiry of standing notice.  

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).

192(6)   Effect of material increase in nature or extent of interest.  

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.

192(7)   Effect of contravention by director.  

A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.

SECTION 193  

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.

SECTION 194  

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).

SECTION 195   RESTRICTIONS ON VOTING - DIRECTORS OF PUBLIC COMPANIES ONLY  

195(1)   Restrictions on voting and being present.  

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.

195(1A)   [ Limitation]  

Subsection (1) does not apply if:

(a) subsection (2) or (3) allows the director to be present; or

(b) the interest does not need to be disclosed under section 191.

Note: A defendant bears an evidential burden in relation to the matter in subsection (1A), see subsection 13.3(3) of the Criminal Code .

195(1B)   [ Strict liability offence]  

An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

195(2)   Participation with approval of other directors.  

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.

195(3)   Participation with ASIC approval.  

The director may be present and vote if they are so entitled under a declaration or order made by ASIC under section 196.

195(4)   Director may consider or vote on resolution to deal with matter at general meeting.  

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.

195(5)   Effect of contravention by director.  

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.

SECTION 196   ASIC POWER TO MAKE DECLARATIONS AND CLASS ORDERS  

196(1)   ASIC's power to make specific declarations.  

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).

196(2)   [ Declaration may be limited]  

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.

196(3)   ASIC's power to make class orders.  

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.

196(4)   [ Order may be conditional]  

The order may be expressed to be subject to conditions.

196(5)   [ Publication in the Gazette ]  

Notice of the making, revocation or suspension of the order must be published in the Gazette .

Division 3 - Duty to discharge certain trust liabilities  

SECTION 197   DIRECTORS LIABLE FOR DEBTS AND OTHER OBLIGATIONS INCURRED BY CORPORATION AS TRUSTEE  

197(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 discharged, 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 solely because of one or more of the following:

(i) a breach of trust by the corporation;

(ii) the corporation ' s acting outside the scope of its powers as trustee;

(iii) a term of the trust denying, or limiting, the corporation ' s right to be indemnified against the liability.

The person is liable both individually and jointly with the corporation and anyone else who is liable under this subsection.

Note: The person will not be liable under this subsection merely because there are insufficient trust assets out of which the corporation can be indemnified.

197(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.

197(3)    
This section does not apply to a liability incurred outside Australia by a foreign company.

197(3A)    
This section does not apply to a liability incurred by a corporation that is:

(a) a notified foreign passport fund; or

(b) the operator of a notified foreign passport fund acting in that capacity.

197(4)    
This section does not apply to a liability incurred by a registrable Australian body outside its place of origin.

197(5)    

This section does not apply to a corporation that is an Aboriginal and Torres Strait Islander corporation.

Note: Section 271-1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 deals with the liability of directors of Aboriginal and Torres Strait Islander corporations for debts and other liabilities incurred by those corporations as trustee.

Division 4 - Powers  

SECTION 198A   POWERS OF DIRECTORS (REPLACEABLE RULE - SEE SECTION 135)  

198A(1)   [ Management of business]  

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.

198A(2)   [ Exercise of powers]  

The directors may exercise all the powers of the company except any powers that this Act 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.

SECTION 198B   NEGOTIABLE INSTRUMENTS (REPLACEABLE RULE - SEE SECTION 135)  

198B(1)   [ Execution of negotiable instrument]  

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.

198B(2)   [ Directors may determine different execution]  

The directors may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.

SECTION 198C   MANAGING DIRECTOR (REPLACEABLE RULE - SEE SECTION 135)  

198C(1)   [ Conferral of powers]  

The directors of a company may confer on a managing director any of the powers that the directors can exercise.

198C(2)   [ Power can be revoked or varied]  

The directors may revoke or vary a conferral of powers on the managing director.

SECTION 198D   DELEGATION  

198D(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 1: The delegation must be recorded in the company ' s minute book (see section 251A ).

Note 2: If the company is a CCIV, section 1224L applies instead of this section.

198D(2)    
The delegate must exercise the powers delegated in accordance with any directions of the directors.

198D(3)    
The exercise of the power by the delegate is as effective as if the directors had exercised it.

SECTION 198E   SINGLE DIRECTOR/SHAREHOLDER PROPRIETARY COMPANIES  

198E(1)   Powers of director.  

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 Act 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.

198E(2)   Negotiable instruments.  

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.

SECTION 198F   RIGHT OF ACCESS TO COMPANY BOOKS  
Right while director

198F(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 1: Section 290 gives the director a right of access to financial records.

Note 2: This section also applies to a director of a corporate director of a CCIV: see section 1225D .

Right during 7 years after ceasing to be director

198F(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

198F(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

198F(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

198F(5)    
This section does not limit any right of access to company books that a person has apart from this section.

Division 5 - Exercise of powers while company under external administration  

SECTION 198G   EXERCISE OF POWERS WHILE COMPANY UNDER EXTERNAL ADMINISTRATION  
Powers of officers while company under external administration

198G(1)    
While a company is under external administration, an officer of the company must not perform or exercise a function or power of that office.

Note: For a CCIV, section 1224Q applies instead of this section.

Offence

198G(2)    
A person commits an offence if:

(a)    the person is an officer of a company; and

(b)    the company is under external administration; and

(c)    the person purports to perform or exercise a function or power of that office.

Penalty: 30 penalty units.

Exceptions

198G(3)    
Subsections (1) and (2) do not apply to the extent that the officer of the company is acting:

(a)    as the external administrator of the company; or

(b)    with the written approval of the external administrator of the company or the Court; or

(c)    in circumstances in which, despite the fact that the company is under external administration, the officer is permitted by this Act to act.

Note: In proceedings to determine whether a person has committed an offence under subsection (2) , a defendant bears an evidential burden in relation to the matters in subsection (3) , see subsection 13.3(3) of the Criminal Code .

198G(4)    
Subsections (1) and (2) do not apply if the company has executed a deed of company arrangement and the deed has not yet terminated.

Note 1: Section 444G deals with the effect of a deed of company arrangement on various persons.

Note 2: In proceedings to determine whether a person has committed an offence under subsection (2) , a defendant bears an evidential burden in relation to the matters in subsection (4) , see subsection 13.3(3) of the Criminal Code .

198G(4A)    

Subsections (1) and (2) do not apply in relation to:

(a)    a company under restructuring; or

(b)    a company that has made a restructuring plan that has not yet terminated.

Functions and powers of liquidator or provisional liquidator prevail in case of conflict

198G(5)    
If subsection (3) applies and there is a conflict between a function or power of the external administrator of the company and a function or power of the officer in relation to the company, the external administrator ' s function or power prevails.

Effect of section

198G(6)    
This section does not remove an officer of a company from office.

198G(7)    
For the purposes of this section, a person is not an officer of a company merely because he or she is a managing controller, appointed under a power contained in an instrument, of property of the company.

198G(8)    
Nothing in this section affects a secured creditor ' s right to realise or otherwise deal with the security interest.

Definitions

198G(9)    

In this section:

external administration
(Repealed by No 87 of 2024, s 3, Sch 1[4] (effective 24 September 2024).)

external administrator
of a company has the same meaning as in Schedule 2 .