Good corporate governance is at the heart of legal compliance and corporate success and reputation.
All stakeholders of a company, including its officers and shareholders, should be aware of their rights and responsibilities under the Corporations Act, the company constitution and various other laws and regulations.
Our specialist commercial lawyers at MatthewsFolbigg are ready to advise you on all manner of corporate governance issues.
What is corporate governance?
Corporate governance relates to both the external (e.g. regulatory compliance) and internal affairs (e.g. management and control) of a company. The sources of corporate governance rules include:
- the company constitution
- the Corporations Act
- various other laws and regulations affecting companies (e.g. environmental laws, OH&S legislation etc.)
- well-established ‘best practice’ principles
What are directors’ duties and liabilities?
The directors are responsible for managing the affairs of the company. Their duties arise from the Corporations Act, the company’s constitution, and other laws and agreements (such as shareholders’ agreements or executive service agreements).
Directors’ duties include the obligation to:
- exercise due care and diligence in the performance of their powers
- act in good faith in the best interests of the company
- exercise their powers for a proper purpose
- not improperly use their position, or information they obtain from their position, to benefit themselves or others or cause detriment to the company
- avoid conflicts of interest between their duties as a director and their personal interests
- maintain accurate financial records and report to ASIC on the financial affairs of the company
- prevent the company from trading while insolvent
Breach of these duties can result in serious penalties and have adverse ramifications including:
- monetary damages
- disqualification from being a director
- reputational damage
What rights do shareholders have?
The shareholders of a company are its owners. Ordinary shareholders have the right to:
- receive dividends (if declared by the directors)
- vote at a general meeting of shareholders
- receive distributions from the surplus assets of the company (if any) upon winding up
Certain corporate actions, such as altering the constitution or the rights attaching to shares, require shareholder approval under the Corporations Act. Shareholders may also exercise certain powers pursuant to the company constitution or a shareholders’ agreement. Shareholders have the power to appoint and remove directors at a general meeting.
A number of remedies may be available to shareholders to protect and enforce their rights, such as actions in relation to oppression of a minority shareholder.
What are the compliance obligations for companies?
Companies are subject to onerous record-keeping and compliance obligations under the Corporations Act. Some of these duties may be performed by the company secretary; otherwise the directors are responsible.
- keep and maintain accurate financial records and report to ASIC on the financial affairs of the company (if required)
- record and retain minutes of shareholders’ and directors’ meetings
- maintain up-to-date internal registers of the company (e.g. register of members, register of directors etc.)
- notify ASIC of certain changes to the company
- make certain notifications and disclosures to the ASX (if a publicly listed company)
- comply with the company constitution (e.g. calling of meetings, complying with notice and quorum requirements etc.)
How can we help?
MatthewsFolbigg’s commercial lawyers are experts in advising companies, officeholders and stakeholders on legal and regulatory compliance matters. Our clients include a range of companies, both big and small, public and private. We also provide corporate secretarial services to companies.
Our team of lawyers, including accredited specialists in business law, will provide you with practical and succinct legal advice and assistance.
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