Corporations Act 2001

CHAPTER 2F - MEMBERS' RIGHTS AND REMEDIES  

SECTION 231  

231   MEMBERSHIP OF A COMPANY  
A person is a member of a company if they:

(a) are a member of the company on its registration; or

(b) agree to become a member of the company after its registration and their name is entered on the register of members; or

(c) become a member of the company under section 167 (membership arising from conversion of a company from one limited by guarantee to one limited by shares).

PART 2F.1A - PROCEEDINGS ON BEHALF OF A COMPANY BY MEMBERS AND OTHERS  

SECTION 236   BRINGING, OR INTERVENING IN, PROCEEDINGS ON BEHALF OF A COMPANY  

236(1)   [ Who may bring proceedings]  

A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a) the person is:

(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii) an officer or former officer of the company; and

(b) the person is acting with leave granted under section 237.

236(2)   [ Use of company's name]  

Proceedings brought on behalf of a company must be brought in the company's name.

236(3)   [ General law right abolished]  

The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

Note 1: For the right to inspect company books, see subsections 247A(3) to (6).

Note 2: For the requirements to disclose proceedings and leave applications in the annual directors' report, see subsections 300(14) and (15).

Note 3: This section does not prevent a person bringing, or intervening in, proceedings on their own behalf in respect of a personal right.

SECTION 237   APPLYING FOR AND GRANTING LEAVE  

237(1)    
A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

237(2)    
The Court must grant the application if it is satisfied that:

(a)    it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b)    the applicant is acting in good faith; and

(c)    it is in the best interests of the company that the applicant be granted leave; and

(d)    if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and

(e)    either:

(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.

237(3)    
A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(a)    the proceedings are:

(i) by the company against a third party; or

(ii) by a third party against the company; and

(b)    the company has decided:

(i) not to bring the proceedings; or

(ii) not to defend the proceedings; or

(iii) to discontinue, settle or compromise the proceedings; and

(c)    all of the directors who participated in that decision:

(i) acted in good faith for a proper purpose; and

(ii) did not have a material personal interest in the decision; and

(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv) rationally believed that the decision was in the best interests of the company.

The director ' s belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

237(4)    
For the purposes of subsection (3) :

(a)    a person is a third party if:

(i) the company is a public company and the person is not a related party of the company; or

(ii) the company is not a public company and the person would not be a related party of the company if the company were a public company; and

(b)    proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

Note 1: Related party is defined in section 228 .

Note 2: For who is a third party of a CCIV, see section 1227H .

SECTION 238   SUBSTITUTION OF ANOTHER PERSON FOR THE PERSON GRANTED LEAVE  

238(1)   [ Application to be substituted]  

Any of the following persons may apply to the Court for an order that they be substituted for a person to whom leave has been granted under section 237:

(a) a member, former member, or a person entitled to be registered as a member, of the company or of a related body corporate;

(b) an officer, or former officer, of the company.

238(2)   [ Power of Court]  

The Court may make the order if it is satisfied that:

(a) the applicant is acting in good faith; and

(b) it is appropriate to make the order in all the circumstances.

238(3)   [ Effect of order]  

An order substituting one person for another has the effect that:

(a) the grant of leave is taken to have been made in favour of the substituted person; and

(b) if the other person has already brought the proceedings or intervened - the substituted person is taken to have brought those proceedings or to have made that intervention.

SECTION 239   EFFECT OF RATIFICATION BY MEMBERS  

239(1)   [ Effect of ratification]  

If the members of a company ratify or approve conduct, the ratification or approval:

(a) does not prevent a person from bringing or intervening in proceedings with leave under section 237 or from applying for leave under that section; and

(b) does not have the effect that proceedings brought or intervened in with leave under section 237 must be determined in favour of the defendant, or that an application for leave under that section must be refused.

239(2)   [ Effect of ratification on Court]  

If members of a company ratify or approve conduct, the Court may take the ratification or approval into account in deciding what order or judgment (including as to damages) to make in proceedings brought or intervened in with leave under section 237 or in relation to an application for leave under that section. In doing this, it must have regard to:

(a) how well-informed about the conduct the members were when deciding whether to ratify or approve the conduct; and

(b) whether the members who ratified or approved the conduct were acting for proper purposes.

SECTION 240  

240   LEAVE TO DISCONTINUE, COMPROMISE OR SETTLE PROCEEDINGS BROUGHT, OR INTERVENED IN, WITH LEAVE  
Proceedings brought or intervened in with leave must not be discontinued, compromised or settled without the leave of the Court.

SECTION 241   GENERAL POWERS OF THE COURT  

241(1)   [ Power of Court]  

The Court may make any orders, and give any directions, that it considers appropriate in relation to proceedings brought or intervened in with leave, or an application for leave, including:

(a) interim orders; and

(b) directions about the conduct of the proceedings, including requiring mediation; and

(c) an order directing the company, or an officer of the company, to do, or not to do, any act; and

(d) an order appointing an independent person to investigate, and report to the Court on:

(i) the financial affairs of the company; or

(ii) the facts or circumstances which gave rise to the cause of action the subject of the proceedings; or

(iii) the costs incurred in the proceedings by the parties to the proceedings and the person granted leave.

241(2)   [ Power to inspect]  

A person appointed by the Court under paragraph (1)(d) is entitled, on giving reasonable notice to the company, to inspect any books of the company for any purpose connected with their appointment.

241(3)   [ Remuneration and expenses]  

If the Court appoints a person under paragraph (1)(d):

(a) the Court must also make an order stating who is liable for the remuneration and expenses of the person appointed; and

(b) the Court may vary the order at any time; and

(c) the persons who may be made liable under the order, or the order as varied, are:

(i) all or any of the parties to the proceedings or application; and

(ii) the company; and

(d) if the order, or the order as varied, makes 2 or more persons liable, the order may also determine the nature and extent of the liability of each of those persons.

241(4)   [ Costs]  

Subsection (3) does not affect the powers of the Court as to costs.

SECTION 242  

242   POWER OF THE COURT TO MAKE COSTS ORDERS  
The Court may at any time make any orders it considers appropriate aboutthe costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section:

(a) the person who applied for or was granted leave;

(b) the company;

(c) any other party to the proceedings or application.

An order under this section may require indemnification for costs.