Question 1

All companies are required to have a company secretary.

Accepted Answer

The requirement for a company to have a company secretary varies by jurisdiction and the size or type of the company. For example, private companies in some countries are not mandated to appoint a company secretary, whereas public companies usually are.

Question 2

Hiroko was on vacation in Cairo. Egypt has a law that says it is illegal to purchase antiquities with the intent to remove them from the country. The penalty is punishable by imprisonment for a period up to 50 years. Hiroko purchased a small statue from a street vendor. Unknown to Hiroko, the statue was actually 2000 years old and was stolen from an archaeological site. The local authorities discovered that Hirko purchased the statute and arrested her. After a trial, Hiroko was convicted but was given a lenient sentence in the form of a $1000 fine due to the mitigating circumstances. Immediately after she paid the fine, she returned to Australia. On her return, her friend offered her a director position with his company. Even though she has not been convicted of any offence in Australia, she is nonetheless disqualified form managing a corporation in Australia.

Accepted Answer

Hiroko was convicted of a crime in Egypt, even though she was given a lenient sentence. This means that she is disqualified from managing a corporation in Australia, even though she has not been convicted of any offence in Australia.

Question 3

The replaceable rules in the Corporations Act provide that directors can be appointed by shareholders or other directors, but if appointed by directors the appointment must be approved by shareholders in accordance with the replaceable rules.

Accepted Answer

The replaceable rules in the Corporations Act allow for directors to be appointed by either the shareholders or the other directors. However, if the appointment is made by the directors, it must be confirmed by the shareholders at the next general meeting, as per the replaceable rules framework. This ensures a level of oversight and approval by the company's owners (the shareholders) over the board's composition.

Question 4

June's husband is a director of Nasty Food Ltd. June regularly gets involved in the business of Nasty Food Ltd. Indeed, she regularly provides suggestions to the board and the board are accustomed to act in accordance with the June's instructions and wishes. Even though June has not been validly appointed as a director, she may still be deemed to be a director thereby incurring all the duties and responsibilities like the other directors of Nasty Food Ltd.

Accepted Answer

June may be considered a "de facto" director or a "shadow" director, depending on the jurisdiction, because she exercises influence and the board acts on her instructions, thereby assuming the responsibilities and duties of a director despite not being formally appointed.

Question 5

The constitution of Maverick Enterprises Ltd provides, inter alia:
"The board of directors can remove any director from office by passing a directors' resolution."
Barry is a director of Maverick Enterprises Ltd. If the other directors pass a resolution removing Barry from office, he will be removed from the board.

Accepted Answer

The answer of The constitution of Maverick Enterprises Ltd provides,...

Question 6

In accordance with the replaceable rules under the Corporations Act, at least two directors must be present at the directors' meeting before business can be validly conducted provided the company is not a single director company.

Accepted Answer

The replaceable rules under the Corporations Act stipulate that for a directors' meeting to be valid for the purpose of conducting business, a quorum must be present, and this typically requires at least two directors, unless the company is a proprietary company with a single director/shareholder.

Question 7

Franz is a director of Blue Sky Ltd. The constitution of Blue Sky Ltd provides that Franz will act as a director for 5 years from the date of his appointment. 3 months after being appointed, Franz has decided he no longer wants to be a director of Blue Sky Ltd. Franz can resign by giving the company written notice of his resignation notwithstanding the 5-year period required by the constitution.

Accepted Answer

Directors generally have the right to resign from their positions at any time by giving written notice to the company, despite any fixed term specified in the company's constitution or agreement.

Question 8

Since de facto directors are not formally appointed, they do not owe any duties to the company.

Accepted Answer

De facto directors, despite not being formally appointed, still owe duties to the company similar to those of formally appointed directors, as they act in the capacity of a director and are treated as such by law.

Question 9

Profit-based bonuses are a way that managers can align members' interests to their own.

Accepted Answer

The answer of Profit-based bonuses are a way that managers...

Question 10

When members disagree with the action of the board of directors, they can:

Accepted Answer

Members cannot control or interfere with specific decisions of the board; however they can ultimately discipline directors by removing them from the board.

Question 11

Muhjid, Salomon and Fang are the only directors of SleepWell Pty Ltd, a company that sells mattresses. Sleepwell does not have a constitution. Muhjid wants to remove Fang from the board as he believes Fang has stolen money from the company's bank account. Which of the following is correct:

Accepted Answer

Sleepwell Pty Ltd does not have a constitution so the Replaceable rules apply and as Sleepwell Pty Ltd is a proprietary company the relevant rule is section 203C which provides that this can be done.

Question 12

The constitution of New Wave Tunes Pty Ltd provides the following article:
"A director's term of appointment expires after 3 years from the date the director is appointed. At the end of the 3 years, the director is deemed to be terminated and must be re-appointed by the shareholders passing an ordinary resolution."
Mary was first appointed as a director of New Wave Tunes Pty Ltd on January 1, 2015. She has never been reappointed by the shareholders but has continued to act as a director. Which of the following is correct?

Accepted Answer

The Corporations Act section 9 (b) provides that the definition of director includes a person if they "act in the position of director"

Question 13

Harambe is a director of Gorilla Ltd and is the chair of the board. Gorilla Ltd does not have a constitution and relies on the replaceable rules in the Corporations Act. Which of the following is correct:?

Accepted Answer

The replaceable rule in the Corporations Act section 248G provides that a resolution is passed by a majority of votes and that the chair has the casting vote.

Question 14

How would you explain the role of the Australian Securities Exchange (ASX) principles of good corporate governance?

Accepted Answer

The answer of How would you explain the role of...

Question 15

What is meant by the "organs" of the company?

Accepted Answer

The answer of What is meant by the "organs" of...

Question 16

What action would you recommend to members who disagree with decisions made by directors?

Accepted Answer

The answer of What action would you recommend to members...

Question 17

Imposing duties upon directors solves what problem?

Accepted Answer

The answer of Imposing duties upon directors solves what problem?...

Question 18

Who calls a directors' meeting, and how do they do it?

Accepted Answer

The answer of Who calls a directors' meeting, and how...

Question 19

How are decisions made at a directors' meeting?

Accepted Answer

The answer of How are decisions made at a directors'...

Question 20

Define and distinguish (a) an executive director and a non-executive director; and (b) the chair of directors and the managing director.

Accepted Answer

The answer of Define and distinguish (a) an executive director...

Quiz 7: Corporate Governance and Company Management