The replaceable rules for company governance

Replaceable rule 2: Powers of directors

Section 198A

(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 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.

Replaceable rule 4: Managing director

Section 198C

(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.

Replaceable rule 1: Voting and completion of transactions – directors of proprietary companies

Section 194

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 interests 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 transaction 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, paragraph (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 material personal interest in a matter relating to the affairs of the company (see s191)

Replaceable rule 3: Negotiable instruments

Section 198B

(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.

Replaceable rule 9: Remuneration of directors

Section 202A

(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.

Replaceable rule 5: Company may appoint a director

Section 201G

A company may appoint a person as a director by resolution passed in general meeting.

Replaceable rule 6: Directors may appoint other directors

Section 201H

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.

Replaceable rule 7: Appointment of managing directors

Section 201J

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.

Replaceable rule 8: Alternate directors

Section 201K

(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)).

Replaceable rule 13: Terms and conditions of office for secretaries

Section 204F

A secretary holds office on the terms and conditions (including the remuneration) that the directors determine

Replaceable rule 10: Director may resign by giving written notice to company

Section 203A

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.

Replaceable rule 11: Removal by members – proprietary company

Section 203C

A proprietary company:

(a) may by resolution remove a director from office; and

(b) may by resolution appoint another person as a director instead.

Replaceable rule 12: Termination of appointment of managing director

Section 203F

(1) A person ceases to be managing director if they cease to be a director.

(2) The directors may revoke or vary an appointment of a managing director.

Replaceable rule 16: Calling directors’ meetings

Section 248C

A directors’ meeting may be called by a director giving reasonable notice individually to every other director.

Note: A director who has appointed an alternate director may ask for the notice to be sent to the alternate director (see subsection 201K(2)).

Replaceable rule 17: Chairing directors’ meetings

Section 248E

(1) The directors may elect a director to chair their meetings. The directors may determine the period for which the director is to be the chair.

(2) The directors must elect a director present to chair a meeting, or part of it, if:

(a) a director has not already been elected to chair the meeting; or

(b) a previously elected chair is not available or declines to act, for the meeting or the part of the meeting.

Replaceable rule 18: Quorum at directors’ meetings

Section 248F

Unless the directors determine otherwise, the quorum for a directors’ meeting is 2 directors and the quorum must be present at all times during the meeting.

Note 1: For special quorum rules for public companies, see section 195.

Note 2: For resolutions of 1 director proprietary companies without meetings, see section 248B.

Replaceable rule 19: Passing of directors’ resolutions

Section 248G

(1) A resolution of the directors must be passed by a majority of the votes cast by directors entitled to vote on the resolution.

(2) The chair has a casting vote if necessary in addition to any vote they have in their capacity as a director.

Note: The chair may be precluded from voting, for example, by a conflict of interest.

Replaceable rule 15: Circulating resolutions of companies with more than 1 director

Section 248A

Resolutions

(1) The directors of a company may pass a resolution without a directors’ meeting being held if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document.

Copies

(2) Separate copies of a document may be used for signing by directors if the wording of the resolution and statement is identical in each copy.

When the resolution is passed

(3) The resolution is passed when the last director signs.

Note: Passage of a resolution under this section must be recorded in the company’s minute books (see section 251A).

Replaceable rule 20: Calling of meetings of members by a director

Section 249C

A director may call a meeting of the company's members.

Replaceable rule 22: When notice by post or fax is given

Section 249J(4)

A notice of meeting is taken to be given:

(a) if it is sent by post—3 days after it is posted; or

(aa) if it is sent by sending the member information in accordance with paragraph 110D(1)(b) by post—3 days after the information is posted; or

(b) if it is sent by means of an electronic communication in accordance with paragraph 110D(1)(c)—on the business day after it is sent; or

(c) if it is sent by giving the member information in accordance with paragraph 110D(1)(d)—on the business day after the day on which the information is sent to the member.

Replaceable rule 25: Chairing meetings of members

Section 249U

(1) The directors may elect an individual to chair meetings of the company’s members.

(2) The directors at a meeting of the company’s members must elect an individual present to chair the meeting (or part of it) if an individual has not already been elected by the directors to chair it or, having been elected, is not available to chair it, or declines to act, for the meeting (or part of the meeting).

(3) The members at a meeting of the company’s members must elect a member present to chair the meeting (or part of it) if:

(a) a chair has not previously been elected by the directors to chair the meeting; or

(b) a previously elected chair is not available, or declines to act, for the meeting (or part of the meeting).

(4) The chair must adjourn a meeting of the company’s members if the members present with a majority of votes at the meeting agree or direct that the chair must do so.

Replaceable rule 24: Quorum

Section 249T

(1) The quorum for a meeting of a company’s members is 2 members and the quorum must be present at all times during the meeting.

Note: For single member companies, see section 249B.

(2) In determining whether a quorum is present, count individuals attending as proxies or body corporate representatives. However, if a member has appointed more than 1 proxy or representative, count only 1 of them. If an individual is attending both as a member and as a proxy or body corporate representative, count them only once.

Note 1: For rights to appoint proxies, see section 249X.

Note 2: For body corporate representatives, see section 250D.

(3) A meeting of the company’s members that does not have a quorum present within 30 minutes after the time for the meeting set out in the notice of meeting is adjourned to a meeting (the resumed meeting) at a later time.

(3A) The directors may specify:

(a) the date and time of the resumed meeting; and

(b) if any of the company’s members is entitled to physically attend the resumed meeting—the location or locations at which the members may do so; and

(c) if virtual meeting technology is to be used in holding the meeting—sufficient information to allow the members to participate in the resumed meeting by means of the technology.

(3B) If the directors do not specify one or more of the things mentioned in subsection (3A):

(a) if the date is not specified—the meeting is adjourned to the same day in the next week; and

(b) if the time is not specified—the meeting is adjourned to the same time; and

(c) if any of the company’s members was entitled to physically attend the meeting and the location is not specified—the meeting is adjourned to the same location or locations as were specified for the original meeting; and

(d) if virtual meeting technology was used in holding the meeting and sufficient information to allow members to participate in the resumed meeting by means of the technology is not specified—participation in the resumed meeting by means of the technology must be provided in the same manner as set out in the notice for the original meeting.

(4) If no quorum is present at the resumed meeting within 30 minutes after the time for the meeting, the meeting is dissolved.

Replaceable rule 29: How many votes a member has

Section 250E

Company with share capital

(1) Subject to any rights or restrictions attached to any class of shares, at a meeting of members of a company with a share capital:

(a) on a show of hands, each member has 1 vote; and

(b) on a poll, each member has 1 vote for each share they hold.

Note: Unless otherwise specified in the appointment, a body corporate representative has all the powers that a body corporate has as a member (including the power to vote on a show of hands).

Company without share capital

(2) Each member of a company that does not have a share capital has 1 vote, both on a show of hands and a poll.

Chair’s casting vote

(3) The chair has a casting vote, and also, if they are a member, any vote they have in their capacity as a member.

Note 1: The chair may be precluded from voting, for example, by a conflict of interest.

Note 2: For rights to appoint proxies, see section 249X.

Replaceable rule 30: Jointly held shares

Section 250F

If a share is held jointly and more than one member votes in respect of that share, only the vote of the member whose name appears first in the register of members counts.

Replaceable rule 31: Objection to right to vote

Section 250G

A challenge to a right to vote at a meeting of a company’s members:

(a) may only be made at the meeting; and

(b) must be determined by the chair, whose decision is final.

Replaceable rule 32: How voting is carried out

Section 250J

(1) A resolution put to the vote at a meeting of a company’s members may be decided on a show of hands unless a poll is demanded.

Note: For listed companies, certain resolutions must be decided on a poll despite this subsection (see section 250JA).

(1A) Before a vote is taken the chair must inform the meeting whether any proxy votes have been received and how the proxy votes are to be cast.

(2) On a show of hands, a declaration by the chair is conclusive evidence of the result, provided that the declaration reflects the show of hands and the votes of the proxies received. Neither the chair nor the minutes need to state the number or proportion of the votes recorded in favour or against.

Note: Even though the chair’s declaration is conclusive of the voting results, the members present may demand a poll (see paragraph 250L(3)(c)).

Replaceable rule 33: When and how polls must be taken

Section 250M

(1) A poll, other than a poll demanded on the election of a chair or the question of an adjournment, must be taken when and in the manner the chair directs.

(2) A poll demanded on the election of a chair or on the question of an adjournment must be taken immediately.

Replaceable rule 27: Who can appoint a proxy? 

This is a replaceable rule for proprietary company only. It is a mandatory rule for public companies. See section 135.

Section 249X

(1) A member of a company who is entitled to attend and cast a vote at a meeting of the company’s members may appoint a person as the member’s proxy to attend and vote for the member at the meeting.

(1A) The person appointed as the member’s proxy may be an individual or a body corporate.

Note: A body corporate may appoint a representative to exercise the powers that the body corporate may exercise as the member’s proxy, see section 250D.

(2) The appointment may specify the proportion or number of votes that the proxy may exercise.

(3) Each member may appoint a proxy. If the member is entitled to cast 2 or more votes at the meeting, they may appoint 2 proxies. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes each proxy may exercise, each proxy may exercise half of the votes.

(4) Disregard any fractions of votes resulting from the application of subsection (2) or (3).

Replaceable rule 28: Proxy vote valid even if member dies, revokes appointment etc

Section 250C(2)

Unless the company has received written notice of the matter before the start or resumption of the meeting at which a proxy votes, a vote cast by the proxy will be valid even if, before the proxy votes:

(a) the appointing member dies; or

(b) the member is mentally incapacitated; or

(c) the member revokes the proxy’s appointment; or

(d) the member revokes the authority under which the proxy was appointed by a third party; or

(e) the member transfers the shares in respect of which the proxy was given.

Note: A proxy's authority to vote is suspended while the member is present at the meeting (see subsection 249Y(3)).

Replaceable rule 21: Notice to joint members

Section 249J(2)

Notice to joint members must be given to the joint member named first in the register of members.

Replaceable rule 26: Business at adjourned meetings

Section 249W(2)

Only unfinished business is to be transacted at a meeting resumed after an adjournment.

Replaceable rule 23: Notice of adjourned meetings

Section 249M

When a meeting is adjourned, new notice of the resumed meeting must be given if the meeting is adjourned for one month or more

Replaceable rule 33A: Pre-emption for existing shareholders on issue of shares in proprietary company

Section 254D

(1) Before issuing shares of a particular class, the directors of a proprietary company must offer them to the existing holders of shares of that class. As far as practicable, the number of shares offered to each shareholder must be in proportion to the number of shares of that class that they already hold.

(2) To make the offer, the directors must give the shareholders a statement setting out the terms of the offer, including:

(a) the number of shares offered; and

(b) the period for which it will remain open.

(3) The directors may issue any shares not taken up under the offer under subsection (1) as they see fit.

(4) The company may by resolution passed at a general meeting authorise the directors to make a particular issue of shares without complying with subsection (1).

Replaceable rule 33B: Other provisions about paying dividends

Section 254U

(1) The directors may determine that a dividend is payable and fix:

(a) the amount; and

(b) the time for payment; and

(c) the method of payment.

The methods of payment may include the payment of cash, the issue of shares, the grant of options and the transfer of assets.

(2) Interest is not payable on a dividend.

Replaceable rule 34: Dividend rights for shares in proprietary companies

Section 254W(2)

Subject to the terms on which shares in a proprietary company are on issue, the directors may pay dividends as they see fit.

Replaceable rule 35: Transmission of shares on death

Section 1072A

If shares not held jointly

(1) If a shareholder who does not own shares jointly dies, the company will recognise only the personal representative of the deceased shareholder as being entitled to the deceased shareholder’s interest in the shares.

(2) If the personal representative gives the directors the information they reasonably require to establish the representative’s entitlement to be registered as holder of the shares:

(a) the personal representative may:

(i) by giving a written and signed notice to the company, elect to be registered as the holder of the shares; or

(ii) by giving a completed transfer form to the company, transfer the shares to another person; and

(b) the personal representative is entitled, whether or not registered as the holder of the shares, to the same rights as the deceased shareholder.

(3) On receiving an election under subparagraph (2)(a)(i), the company must register the personal representative as the holder of the shares.

(4) A transfer under subparagraph (2)(a)(ii) is subject to the same rules (for example, about entitlement to transfer and registration of transfers) as apply to transfers generally.

If shares held jointly

(5) If a shareholder who owns shares jointly dies, the company will recognise only the survivor as being entitled to the deceased shareholder’s interest in the shares. The estate of the deceased shareholder is not released from any liability in respect of the shares.

Replaceable rule 36: Transmission of shares on bankruptcy

Section 1072B

(1) If a person entitled to shares because of the bankruptcy of a shareholder gives the directors the information they reasonably require to establish the person’s entitlement to be registered as holder of the shares, the person may:

(a) by giving a written and signed notice to the company, elect to be registered as the holder of the shares; or

(b) by giving a completed transfer form to the company, transfer the shares to another person.

(2) On receiving an election under paragraph (1)(a), the company must register the person as the holder of the shares.

(3) A transfer under paragraph (1)(b) is subject to the same rules (for example, about entitlement to transfer and registration of transfers) as apply to transfers generally.

(4) This section has effect subject to the Bankruptcy Act 1966.

Replaceable rule 37: Transmissions of shares on mental incapacity

Section 1072D

(1) If a person entitled to shares because of the mental incapacity of a shareholder gives the directors the information they reasonably require to establish the person's entitlement to be registered as the holder of the shares

(a) the person may:

(i) by giving a written and signed notice to the company, elect to be registered as the holder of the shares; or

(ii) by giving a completed transfer form to the company, transfer the shares to another person; and

(b) the person is entitled, whether or not registered as the holder of the shares, to the same rights as the shareholder.

(2) On receiving an election under subparagraph (1)(a)(i), the company must register the person as the holder of the shares.

(3) A transfer under subparagraph (1)(a)(ii) is subject to the same rules (for example, about entitlement to transfer and registration of transfers) as apply to transfers generally.

Replaceable rule 38: Registration of transfers

Section 1072F

(1) A person transferring shares remains the holder of the shares until the transfer is registered and the name of the person to whom they are being transferred is entered in the register of members in respect of the shares.

(2) The directors are not required to register a transfer of shares in the company unless:

(a) the transfer and any share certificate have been lodged at the company’s registered office; and

(b) any fee payable on registration of the transfer has been paid; and

(c) the directors have been given any further information they reasonably require to establish the right of the person transferring the shares to make the transfer.

(3) The directors may refuse to register a transfer of shares in the company if:

(a) the shares are not fully‑paid; or

(b) the company has a lien on the shares.

(4) The directors may suspend registration of transfers of shares in the company at the times and for the periods they determine. The periods of suspension must not exceed 30 days in any one calendar year.

Replaceable rule 39: Additional general discretion for directors of proprietary companies to refuse to register transfers

Section 1072G

The directors of a proprietary company may refuse to register a transfer of shares in the company for any reason.