Corporate Governance: Directors Essay

Submitted By Krystie1
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Corporate Governance | Assessment 2 - Directors Assignment | | | | Krystie Bestt | Sept/Oct 2010 | |

Contents Question 1: 3 Question 2: 4 One.Tel: 6 Enron Corporation: 7 Principles of Good Corporate Governance: 8 Question 3: 9 Question 4: 10 Question 5: 11 Question 6: 12 References: 14

Question 1:
The issue in this scenario is that the directors of Berringer Limited are not satisfied that Suzie is living up to her responsibilities as a director, by not attending meetings regularly. This is most certainly a problem as she has a responsibility to the company to act in the best interests of the shareholders, especially as one of her key roles is to represent the class C shareholders.
I am presuming that the other directors have already discussed their concerns with Suzie about her lack of attendance at meetings. She has not improved in her attendance and the other directors are likely looking to have her removed from her position and replaced.
As stated in Section 203D(1) of the Corporations Act 2001, the power of shareholders to remove directors by resolution overrides anything in the companies constitution, any agreements made between the company and the director, and any agreements made between the members of the company and the director. Therefore directors cannot agree between themselves to remove another director, any decision of such would be void. This power remains that of the shareholders (ASIC website, viewed 15/8/10).
Section 203D(2)-(7) of the Corporations Act 2001 details the legislative requirements in regards to removal of a director of a public company. The process is as follows: * There needs to be a notice of intention to move the resolution given to the company a minimum of two months before the meeting to pass the resolution to be held * A copy of the notice must be given to the director to be removed as soon as practical after it is received by the company * The director is entitled to put their case forward to members by means of a written statement to be circulated amongst members, (provided the statement is not defamatory or over 1000 words long), and speak to a motion at the meeting
A requirement of the Act is that members of public companies receive at least 21 days’ notice of the meeting where there is to be a resolution to remove a director.
Due to the fact that Susie represents the Class C shareholders, the resolution cannot take effect until a replacement representative has been appointed. This is also the case for a director representing debenture holders (Jaque & Golchin, SWAAB Publications, Dec 2008).
However there are some conflicting views as to whether the procedures for removal of a director of a public company as set out in Section 203D are mandatory or not.
Up until the case of Scottish & Colonial Ltd -v- Australian Power and Gas Co Ltd 2007 it had always been considered that Section 203D of the Act did not replace any of the other powers of removal that companies have. These other powers may include self-executing provisions in a company’s constitution for reasons such as failing to remain employed by the company, losing qualifications or failing to attend meetings (Jaque & Golchin, SWAAB Publications, Dec 2008). In the case of Scottish & Colonial Ltd -v-Australian Power and Gas Co Ltd 2007, the NSW Supreme Court decided that a general meeting called by a director of Australian Power and Gas Company Ltd (APG) could not by resolution remove directors from the company because sub-sections (2), (3) and (4) of s 203D of the Act were not complied with. These sections state that 2 months notice is to be given to the company, the directors in question be presented with a copy of the notice, and given an opportunity to state their case. As these sections of the Act were not met, the Justice Bryson held that the meeting was invalid to remove the directors.
This decision has conflicted against other decisions