Does your Australian company need to hold directors meetings to pass resolutions?
Updated: 7 December 2019
You are likely juggling many important tasks as a business owner, so, you may be wondering if you can avoid some meetings like meetings to pass resolutions.
The Corporations Act 2001 (Cth) regulates companies in Australia, and we are going to cover what it says.
First, if you are both a sole director and sole shareholder, you need not worry about these meeting rules, because they don’t apply to you.
But ... it's worthwhile to read on in case you add more directors.
So let's start with replaceable rules.
First, many of the sections in the Corporations Act about how meetings are run are replaceable rules - this means, they aren't mandatory.
In fact, the Corporations Act states you may use replaceable rules, a constitution or both.
Also, your company constitution may either adopt, modify or override replaceable rules.
Here are some useful tips from the outset:
Check if you have a constitution that deals with meetings and resolutions. If you do, then check the meeting rules.
You may change your constitution if meetings are not practical, but make sure to follow the rules (usually in your constitution).
If you don’t have a constitution, you may start with replaceable rules and tweak those rules to work for you.
For your convenience, meeting rules from the Corporations Act are below.
So, if you don’t see ‘replaceable rule’ next to the legislation below, it’s not optional that is ‘replaceable’. It’s the law that applies regardless.
Resolutions and declarations without meetings
Section 248A Circulating resolutions of companies with more than 1 director (replaceable rule)
Directors of a company may pass a resolution without a directors’ meeting, if all the directors vote and sign a resolution in favour of it.
Also, directors may sign separate copies of a document, if the wording is identical.
And the resolution is passed when the last director signs.
248B Resolutions and declarations of 1 director proprietary companies (replaceable rule)
If you are a sole director, you may pass a resolution by recording and signing the record or declaration.
Directors meetings generally
Section 248C Corporations Act (replaceable rule)
A director may call a meeting by giving reasonable notice individually to every other director.
Section 248D Use of technology Corporations Act (not a replaceable rule)
Directors may use technology to call or consent to a meeting.
The consent may be standing, but if consent is withdrawn that director needs to do so within a reasonable period before the meeting.
There is no direction about what’s reasonable in the Corporations Act.
Section 248E Chairing directors meetings (replaceable rule)
The directors of your company may elect a director to chair the meetings and how long the chair will complete this task.
Also, the directors must elect a director present to chair a meeting or part of it, if:
- A director has not already been chosen to chair the meeting; or
- A previously chosen chair is not available or declines to act for the meeting or part of it.
Section 248F Quorum at directors’ meetings (replaceable rule)
Unless the directors agree otherwise, the quorum for a directors meeting is 2 directors and they must be present at all times during the meeting.
Section 248G Passing of directors’ resolutions (replaceable rule)
A resolution of the directors needs a majority of the votes. The chair has a casting vote if necessary in addition to any vote they have in their capacity as a director.
Now, this particular rule is not always popular so many startups opt for ‘the chair does not have a casting vote’.
And you may be wondering, what if there’s a tie? This is a common question.
You may agree ahead of time who will have the casting vote each director's meeting or resolution.
Finally, check the meeting rules in your constitution. Consider changing your meeting rules, careful to follow rules on this in your constitution to do this.
If you don't have a constitution, you may start with the replaceable rules in the Corporations Act.
I wish you every success!