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Section 203D of the Corporations Act 2001

Posted: Tue Jun 13, 2017 12:55 am
by GenYCPA
Section 203D of the Corporations Act 2001 gives shareholders the right to remove a director, irrespective of what is in the company’s constitution.

Code: Select all

(1)  A public company may by resolution remove a director from office despite anything in:
                     (a)  the company's constitution (if any); or
                     (b)  an agreement between the company and the director; or
                     (c)  an agreement between any or all members of the company and the director.

(2)  Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

(3)  The company must give the director a copy of the notice as soon as practicable after it is received.

(4)  The director is entitled to put their case to members by:
                     (a)  giving the company a written statement for circulation to members (see subsections (5) and (6)); and
                     (b)  speaking to the motion at the meeting (whether or not the director is a member of the company).

(5)  The written statement is to be circulated by the company to members by:
                     (a)  sending a copy to everyone to whom notice of the meeting is sent if there is time to do so; or
                     (b)  if there is not time to comply with paragraph (a)--having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.

(6)  The director's statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.

(7)  If a person is appointed to replace a director removed under this section, the time at which:
                     (a)  the replacement director; or
                     (b)  any other director;
is to retire is to be worked out as if the replacement director had become director on the day on which the replaced director was last appointed a director.
The possible ways we could call a meeting:
  • Persuade a current director to call a meeting (s249C - this is a replaceable rule so probably not a valid method under our constitution);
  • Garner the support and signatures of 5% of voting members (s249D or s249F - need to have a valid register as per s173 request to determine who is in fact a voting member); or
  • Apply to either the Federal Court or the Supreme Court of Victoria if it is impracticable to call the meeting in any other way (s249G)
Now here is where it gets interesting - even if we can't call a meeting - we can still give CPA Australia notice of a 1,000 word resolution that we propose to move at a general meeting (next AGM if all else fails) as well as providing a 1,000 word Explanatory Memorandum.

CORPORATIONS ACT 2001 - SECT 249N
(1) The following members may give a company notice of a resolution that they propose to move at a general meeting:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at a general meeting.
CORPORATIONS ACT 2001 - SECT 249O
(1) If a company has been given notice of a resolution under section 249N, the resolution is to be considered at the next general meeting that occurs more than 2 months after the notice is given.

(2) The company must give all its members notice of the resolution at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a meeting.

(3) The company is responsible for the cost of giving members notice of the resolution if the company receives the notice in time to send it out to members with the notice of meeting.

(4) The members requesting the meeting are jointly and individually liable for the expenses reasonably incurred by the company in giving members notice of the resolution if the company does not receive the members' notice in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.

(5) The company need not give notice of the resolution:
(a) if it is more than 1,000 words long or defamatory; or
(b) if the members making the request are to bear the expenses of sending the notice out--unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in giving the notice.
CORPORATIONS ACT 2001 - SECT 249P
(1) Members may request a company to give to all its members a statement provided by the members making the request about:
(a) a resolution that is proposed to be moved at a general meeting; or
(b) any other matter that may be properly considered at a general meeting.

(2) The request must be made by:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at the meeting.

(6) After receiving the request, the company must distribute to all its members a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a general meeting.

(7) The company is responsible for the cost of making the distribution if the company receives the statement in time to send it out to members with the notice of meeting.

(8) The members making the request are jointly and individually liable for the expenses reasonably incurred by the company in making the distribution if the company does not receive the statement in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.

(9) The company need not comply with the request:
(a) if the statement is more than 1,000 words long or defamatory; or
(b) if the members making the request are responsible for the expenses of the distribution--unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in making the distribution.
So - it turns out that we, as members, do in fact have the power to remove those directors - irrespective of what the constitution or the director's say.

Re: Section 203D of the Corporations Act 2001

Posted: Tue Jun 13, 2017 8:54 am
by michaelk
GenYCPA wrote:
Tue Jun 13, 2017 12:55 am
CORPORATIONS ACT 2001 - SECT 249P
(1) Members may request a company to give to all its members a statement provided by the members making the request about:
(a) a resolution that is proposed to be moved at a general meeting; or
(b) any other matter that may be properly considered at a general meeting.

(2) The request must be made by:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at the meeting.

(6) After receiving the request, the company must distribute to all its members a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a general meeting.

(7) The company is responsible for the cost of making the distribution if the company receives the statement in time to send it out to members with the notice of meeting.

(8) The members making the request are jointly and individually liable for the expenses reasonably incurred by the company in making the distribution if the company does not receive the statement in time to send it out with the notice of meeting. At a general meeting, the company may resolve to meet the expenses itself.

(9) The company need not comply with the request:
(a) if the statement is more than 1,000 words long or defamatory; or
(b) if the members making the request are responsible for the expenses of the distribution--unless the members give the company a sum reasonably sufficient to meet the expenses that it will reasonably incur in making the distribution.
Does this mean we have the ability to force CPA Australia to distribute a notice on our behalf? As opposed to having to get the membership list and do it ourselves?

Re: Section 203D of the Corporations Act 2001

Posted: Tue Jun 13, 2017 9:03 am
by nakedadmin
I think this relates only to the AGM. Too bad we were not quite organised enough before the last AGM.

I don't know if we could use it in that way, I think if we did they would only be required to send it out with next years notice of AGM. But I'm not sure.

Re: Section 203D of the Corporations Act 2001

Posted: Tue Jun 13, 2017 9:21 am
by GenYCPA
S249N to S249O all relate to Division 4--Members' rights to put resolutions etc. These allow for members propose a resolution at any general meeting. The problem is being able to call a general meeting, Division 3--How to call meetings of members (s249C to 249G). If all else fails - there will be the next AGM before 31st May 2018. I agree, if this had been developed earlier then a motion could have been moved at the last AGM but we didn't have all the facts together in time (in no small part due to the lack of disclosure from the board).

Re: Section 203D of the Corporations Act 2001

Posted: Tue Jun 13, 2017 9:38 am
by Eric Nacpa
An alternative could be section 232 in relation to oppressive conduct and obtaing a court order. The possible orders can be wide ranging.

Re: Section 203D of the Corporations Act 2001

Posted: Tue Jun 13, 2017 10:36 pm
by The Nude CPA
My understanding was that the notice would need to be issued immediately, regardless of when the next general meeting takes place (so long as it occurs more than two months after the notice is given), as it is notice of a resolution that members propose to move (as soon as practicable/at the next available GM).

So, even if we need to wait for the AGM, at least the issues being raised have been put in front of all voting members via the CPAA mailing list.

That I would see as a major positive in terms of raising awareness.

Re: Section 203D of the Corporations Act 2001

Posted: Wed Jun 14, 2017 12:20 am
by GenYCPA
s203D(5) would indicate the statement by the members accompanying the proposed resolution only needs to be sent with the notice to the meeting. So we can propose the resolution without having the meeting lined up - but they can probably sit on it until the next notice for a general meeting is sent.

I think the s203D resolution needs to be sent sooner rather than later - and at least 2 months before any proposed members meeting.

Re: Section 203D of the Corporations Act 2001

Posted: Wed Jun 14, 2017 12:28 am
by The Nude CPA
CORPORATIONS ACT 2001 - SECT 249P
(6) After receiving the request, the company must distribute to all its members a copy of the statement at the same time, or as soon as practicable afterwards, and in the same way, as it gives notice of a general meeting.
Of course they would try to sit on it, but this seems like the notice would need to go out ASAP.